How will the 3% surcharge on additional properties for second homes be calculated in 2026 if I own a small holiday let now and want to purchase a new main residence?
Quick Answer
In 2026, the additional dwelling SDLT surcharge will be 5%, not 3%. If buying a new main residence, you'll pay the extra 5% then claim a refund if your old main residence sells within 36 months.
## Will the Additional Dwelling Surcharge Affect My New Main Residence Purchase?
Yes, the additional dwelling surcharge will initially affect your new main residence purchase in 2026. From April 2025, the surcharge increased to 5% (up from 3%) on top of the standard Stamp Duty Land Tax (SDLT) rates for additional residential properties over £40,000. If you already own a holiday let, even if it's considered a business, HMRC generally treats it as an 'additional dwelling' for SDLT purposes when you purchase another property, unless it strictly qualifies as a non-residential property or certain business-related exemptions apply. If you are replacing your main residence, you will pay the additional 5% initially, but may be able to claim a refund later.
## How is the 5% Surcharge Calculated if I Own a Holiday Let?
The 5% additional dwelling surcharge is calculated on the entire purchase price of your new main residence if your holiday let means you own more than one residential property. Even if your current holiday let is available 140+ days/year and let 70+ days, potentially qualifying for business rates rather than council tax, for SDLT purposes, it's typically considered a residential dwelling. For instance, if you purchase a new main residence for £400,000, you would pay the standard SDLT rates (e.g., 5% on £250k-£400k for £7,500) PLUS the 5% surcharge on the entire £400,000, equating to an additional £20,000, bringing the initial total SDLT to £27,500. This is typically applicable unless you are selling your previous main residence simultaneously or within a specified timeframe.
## Can I Claim a Refund on the 5% Surcharge?
Yes, you can claim a refund on the 5% additional dwelling surcharge if you purchase a new property intending it to be your main residence, and you sell your previous main residence within 36 months of buying the new one. The crucial point here is that the property you sell must have been your *previous main residence*, not just any additional property like a holiday let or buy-to-let. If your holiday let was never your main residence, securing a refund of the 5% surcharge paid on your new main home would depend entirely on you having sold your *actual* previous main residence within the 36-month window allowed by HMRC. Always check HMRC guidance for the most up-to-date conditions for claiming a refund on SDLT for additional properties. This is a common query when purchasing a new primary residence while retaining other rental assets, including holiday homes.
## What Factors Determine if my Holiday Let Counts as an Additional Dwelling for SDLT?
For SDLT purposes, a property is generally considered an 'additional dwelling' if it's suitable for use as a dwelling, even if it's run as a business. The primary consideration is whether the property is residential in nature. HMRC guidance states that if you own two properties, and neither is being replaced as your main residence, the additional higher rates will apply. The specific rules around holiday lets and SDLT can be complex, especially with furnished holiday lets (FHL) election for income tax. However, the SDLT rules generally classify property based on its suitability for use as a dwelling. Unless the holiday let is truly non-residential (e.g., a commercial unit with no residential component), it will likely be counted. An investor also needs to consider if the purchase exceeds the £50,000 minimum value for SDLT, which most new main residences will. The intention of the purchaser at the point of sale is a key determinant for SDLT refunds, often termed 'replacement of main residence'.
Steven's Take
The increase of the additional dwelling surcharge to 5% from April 2025 creates a significant upfront cost for investors who are also moving homes. Many assume their holiday let, because it's a business, won't trigger the surcharge. However, for SDLT, that residential aspect means it often does. The key to mitigating this is ensuring you sell your *previous main residence* within the 36-month window to claim that refund. Without a clear plan for your main residence, or if your previous home doesn't sell, that 5% becomes a permanent, substantial increase in purchase costs. Always consider the cash outlay versus any potential refund before committing.
What You Can Do Next
Verify current SDLT rates: Check gov.uk/stamp-duty-land-tax-rates for the most up-to-date standard and higher rates for additional dwellings.
Assess refund eligibility: Review HMRC guidance on 'higher rates for additional dwellings: refunds' at gov.uk/higher-rates-stamp-duty-land-tax-refunds to understand specific conditions for selling your previous main residence within 36 months.
Consult a property tax specialist: Engage a solicitor or accountant specialising in property tax (search 'SDLT specialist accountant' on ICAEW.com) to get tailored advice on your specific holiday let property and main residence purchase plan.
Calculate potential SDLT liability: Use HMRC's SDLT calculator at gov.uk/stamp-duty-land-tax-calculator to estimate the initial SDLT payable with the 5% surcharge, and the amount to be reclaimed.
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