Remortgage for a Second Home

What tax do you pay when buying a second property?

If it’s for a Buy to Let or a holiday home, you would obviously be paying tax on the income from the tenants. That’s really moving into accountancy territory, rather than mortgage advice.

On a Buy to Let, there are different ways of buying. If you opt for personal ownership, the income you receive would be added to your current income for tax purposes. If that takes you into a higher rate tax band, you’ll be paying 40%.

However, you might choose to buy it through an SPV or a limited company, in which case you only pay tax on the profit rather than the rent.

I’d be able to offer more targeted advice in a real situation – because I would know what your income is and what you plan on doing with the property. I would still probably point you in the direction of an accountant as well as a mortgage advisor, though.

What are the risks and benefits of owning a second home in the UK?

One benefit is that you’ve got somebody else paying your mortgage. If it’s a repayment mortgage, the capital is coming down and hopefully after 20, 25, 30 or 40 years, that mortgage is paid off. With any luck, you haven’t had to actually put your hand in your pocket.

The disadvantage is that a tenant doesn’t ordinarily look after a property as well as an owner-occupier would. There’s maintenance to take into account. Boilers break down, windows get broken and you will have to pay. That maintenance can be higher than on your own house.

But you’re building up equity in that property and potentially getting a good second income.
Tenants can also move out with short notice, irrespective of tenancy agreements, which can leave you in a quandary. You’re still responsible for their mortgage payments whether the tenant pays or not.

How much stamp duty would I pay on a second home?

At the time of recording this it’s the end of April, 2025. It’s a thorny subject because from 1 April, discounted stamp duty disappeared.

You would always pay ‘second tier’ stamp duty on a second home. If you’re not using your next house as a main residence, or you’re retaining your existing property to rent out, it’s second tier stamp duty. That can be very expensive, so it’s something you should always look at.

I get a number of enquiries every week about Buy to Let properties. In fact, last night someone rang me. He was living in a £160,000 property and wanted to buy a £260,000 property and keep his existing one. He didn’t realise how much stamp duty would be for the onward purchase.

The stamp duty in that particular case was an awful lot more than he was expecting. He’d assumed that because it was going to be his own house, he would be paying stamp duty of £3,000. But in reality I think it was about £16,000. He decided not pursue a second house because of that – he thought it would be more beneficial to sell that property and move.

Do I have to declare a second home?

Absolutely. You would normally use an accountant. You can do your own tax assessments, but most people have an accountant. The income needs to be declared to HMRC, whether you have a limited company or it’s personal ownership.

The solicitor when you are purchasing would automatically declare it to HMRC as part of their checks. They would report that it’s a second home as a matter of course.

How can a mortgage broker help here? Have you got anything else to add?

Certainly before recommending anything we would chat to a client and find out the circumstances. We’d explore what savings they’ve got, the equity in the property and the plans for the second house. It’s all part of our assessment.

A good mortgage broker will steer you in the right direction as to which lenders would be better and which to avoid. We’ll talk you through every step of the way.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

For specialist tax advice, please refer to an accountant or tax specialist.