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Taxes on second homes surge up to 600pc under the Tories

michael gove
Levelling Up Secretary Michael Gove has announced a series of measures for second home owners - Jane Barlow/PA

Tory taxes have added more than £13,000 to the cost of buying and owning a second home in the past decade.

More taxes, greater powers to levy council tax hikes and rising insurance premiums have led to a record low in second home purchases – helped along by house price growth.

In 2012, a typical second home buyer would have paid £2,246 in stamp duty and council tax, according to figures from estate agency Hamptons. Today, this figure stands at £13,803.

The Government introduced a 3pc stamp duty land tax surcharge in 2016 targeting second properties, even if the property price is below the starting threshold for the tax – currently £250,000.

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From 2025, new powers to double council tax for second home owners will also come into effect – meaning those in several holiday hotspots face a £4,130 a year penalty for ‘furnished homes not used as a sole or main residence’.

Combined with stamp duty this takes the total first-year cost to £15,858 – an increase of more than 600pc.

Councils including East Devon, Bath and North East Somerset, and North Norfolk have voted to impose a 100pc tax levy on second home owners under new powers granted to them by the Levelling Up and Regeneration Act 2023.

Around 27 are understood to be considering doubling the rate in total.

“There is not a great deal of sympathy for those who are lucky enough to own a second home, given the housing crisis in these tourist-destination communities,” says Paula Higgins, chief executive of HomeOwners Alliance.

“But the Government can’t assume that all second home owners have the cash to pay as they may have inherited the property. The silver lining for second home owners is that in England and Scotland, the council tax band (A-H) depends on the price of the property in 1991 and there are no plans to change this.

“If England followed Wales’ lead and revalued all properties it would be very likely that the council tax would disproportionately rise in areas that have seen strong house price growth.”

Last year the proportion of properties bought as second homes in Britain was the lowest on record, as higher house prices, the cost of living crisis and increased mortgage costs impacted buyer sentiment. Just 1.5pc of property transactions last year were second home purchases, down from 2.3pc in 2010, according to Hamptons.

Furthermore, you could face additional council tax if your home is vacant. Under the same legislation, homeowners risk paying up to 100pc more council tax if their second property is empty. If the property is empty for over 10 years, this rises to 300pc of the local levy.

In Scotland the changes have already taken place and councils aren’t required to give 12 months notice before raising tax rates as they are in England.

Councils have gone even further in Wales and now have the authority to increase second home taxes by up to 300pc.

It is not just taxes pushing up the cost of owning a second home: insurance premiums for non-main residences have risen 20pc in the past year, according to figures from Compare the Market. Direct Line has withdrawn from the market altogether and no longer insures second homes.

The Government has even increased the cost of selling your holiday getaway. The annual exemption for capital gains tax – the tax you must pay when you sell your home – was £10,600 in 2012, however today, it is £6,000 and scheduled to fall to £3,000 from April.

While prices have risen for some second home owners just using their property privately, they have become even steeper for those running short-term lets, including Airbnbs and buy-to-let owners.

Last week, Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, announced plans to create a register of short-term holiday lets, and second home owners who want to let houses on Airbnb will be forced to obtain planning permission from this summer.

Separately, lenders are also cracking down on short-term holiday lets. This week Leeds Building Society announced it will restrict mortgage lending on holiday lets in some tourist hotspots in England.

The lender said holiday lets have a “stranglehold” on the pipeline of homes available for local people in some locations.

The society has worked with North Norfolk District Council and North Yorkshire Council to set up a 12-month trial, during which it will stop new loans for holiday let homes. Lending will be restricted from the end of March.

Leeds Building Society chief executive Richard Fearon said: “In some areas, holiday lets have grown to have a significant stranglehold on the pipeline of homes available for local people to live in and we want to play our part in removing it.”

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