Why a second home costs more to buy
Governments across the UK use taxation to discourage second-home ownership and free up housing stock for residents. The most significant measure is the additional-property stamp duty surcharge, which in England currently adds 5 percentage points to every SDLT band on the purchase price. On a £300,000 second home purchased in England, this alone adds around £15,000 to your upfront costs compared with buying the same property as a first or only home.
Scotland applies an Additional Dwelling Supplement (ADS) of 8% on the full price under LBTT, and Wales applies a higher rate of Land Transaction Tax (LTT) to additional properties. The rates change periodically, so always use an up-to-date calculator for the specific nation where you are buying.
On the financing side, lenders treat second homes as higher risk because you are managing two sets of housing costs. They typically want a larger deposit, apply a stricter affordability assessment, and may price the mortgage slightly above their standard residential rates. For holiday lets that will generate rental income, lenders assess the application differently again, often requiring a buy-to-let product.
Additional costs of a second home versus a sole home
Beyond the purchase price, budget for these costs that do not apply to a sole main residence.
| Cost | How it differs from a main home | Typical impact |
|---|---|---|
| Stamp duty surcharge | Added on top of standard rates for every band | Often £10,000 to £30,000 extra on a £250,000 to £500,000 purchase |
| Deposit | Lenders typically want more equity | Usually 25% minimum, sometimes 40% for holiday lets |
| Mortgage rate | Priced as higher risk | Often 0.2 to 0.5 percentage points above equivalent main-residence deal |
| Council tax | Possible premium on furnished second homes | Up to 100% extra in many English councils from April 2025 |
| Buildings insurance | A second premium on top of your main home | £200 to £800 a year depending on location and risk |
| Capital gains tax on sale | No main-residence relief | 18% (basic rate) or 24% (higher rate) on the taxable gain |
| Income tax on rental income | Taxable if you let it out | At your marginal rate, less allowable expenses |
These are illustrative figures. Tax rates and surcharges change: verify with a tax adviser for your specific situation.
Mortgages for a second home
Getting a mortgage on a second home requires demonstrating to the lender that you can comfortably afford both your existing mortgage (or rent) and the new loan simultaneously. Lenders apply a stress test at rates above the current rate to assess this. Most want at least a 25% deposit, and some specialist holiday-let lenders require 30 to 40%.
If you plan to let the property to holidaymakers, a standard second-home residential mortgage is unlikely to be suitable. Most lenders require a buy-to-let or holiday-let mortgage product in this scenario. These are assessed differently, with rental income projections forming part of the affordability calculation. Rates on holiday-let products are typically higher than standard residential deals.
A whole-of-market mortgage broker is particularly valuable when buying a second home because the product landscape is fragmented and lenders' criteria vary considerably. Some high-street banks will not lend on second homes at all; others have specialist teams with competitive rates.
Capital gains tax when you sell
Because a second home is not your only or main residence, selling it at a profit normally triggers capital gains tax (CGT) on the gain above your annual allowance (currently £3,000 per person for 2024/25 and 2025/26). Residential property gains are taxed at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, following the changes in the October 2024 Budget.
CGT on UK residential property must be reported and paid within 60 days of completion using HMRC's online capital gains tax service. You can reduce the bill by deducting purchase and selling costs (including stamp duty on purchase, estate agent fees, legal fees and the cost of capital improvements, though not routine maintenance). Married couples and civil partners each have their own annual allowance, so holding the property in joint names uses two allowances and can halve the bill on sale.
Keep meticulous records of all purchase costs and capital expenditure throughout your ownership. If you have ever let the property commercially, private letting relief may also apply in some circumstances.
Key questions to ask before buying
Before committing, work through these practical and financial questions:
- Have I calculated the stamp duty surcharge for the nation where I am buying?
- Can I afford both mortgages if either property sits empty or if rates rise?
- Will I let it out, and if so do I need a buy-to-let or holiday-let mortgage?
- What is the council tax position in this specific local authority area?
- Can I get affordable buildings and contents insurance, especially if it is near the coast or in a flood zone?
- Have I taken advice on capital gains tax and how to minimise it on eventual sale?
- Does the purchase make financial sense once all the extra costs are included?
The stamp duty surcharge is the single biggest upfront extra cost
The additional-property surcharge applies even if your main home is overseas and even if you intend to move into the second home later. Use a stamp duty calculator for the relevant UK nation before committing, and check whether any reclaim window applies if you sell your previous main home shortly after buying.