SDLT 5% Surcharge on Second Homes: The Additional Dwelling Supplement Explained

Quick answer

The Additional Dwelling Supplement (ADS) is an extra 5% Stamp Duty Land Tax on residential property purchases in England and Northern Ireland, where the buyer (or part of a buyer group) owns any other residential property at the point of completion.

For 2025/26:

• Surcharge rate: 5% of the entire purchase price (not just the slice above standard SDLT bands).
• Threshold: properties under £40,000 escape the surcharge.
• In effect since: April 2016; raised from 3% to 5% on 31 October 2024.

Worked example — £250,000 property

As home-mover (no other property owned)

Standard SDLT:

• 0% × £125,000 = £0
• 2% × £125,000 = £2,500
• Total: £2,500

As second-home buyer (own one other property)

Standard SDLT + 5% surcharge on entire price:

• Standard: £2,500.
• ADS: 5% × £250,000 = £12,500.
• Total: £15,000.

That's £12,500 of extra cost vs the same property as a main residence.

As company purchase

• Companies pay SDLT on every slice from £0 (no nil-rate band).
• Plus the 5% ADS surcharge.
• £250,000: 15% × £250,000 = £37,500 (the "15% special rate" for companies — applies on residential dwellings over £500k specifically; for under £500k it's standard scale + 5%).

For properties under £500k, the company rate is roughly standard scale + 5% (matching the personal ADS).

Worked example — £400,000 property

Home-mover

• 0% × £125k = £0
• 2% × £125k = £2,500
• 5% × £150k = £7,500
• Total: £10,000

Second-home buyer

• Standard SDLT: £10,000.
• ADS: 5% × £400,000 = £20,000.
• Total: £30,000.

Non-UK resident BTL purchase

• Standard SDLT: £10,000.
• ADS 5%: £20,000.
• Non-resident 2% on whole price: £8,000.
• Total: £38,000 — almost 10% of the purchase price.

The cumulative load on non-resident BTL purchases is a major reason for the foreign-money slowdown in UK property since the 2021 introduction of the 2% non-resident charge.

What counts as "another residential property"

You're an "additional dwelling buyer" if you (or any joint purchaser, or any company that includes you as significant beneficial owner) own:

• A property in the UK that you or someone else lives in.
• A property abroad (yes — even an apartment in Spain counts).
• A leasehold property with 21+ years left on the lease.
• A residential property held in a trust where you're a beneficiary.

Exceptions — these don't count:

• Properties valued under £40,000.
• Caravans, mobile homes, houseboats (unless they're your only residential property).
• Commercial property (offices, factories, shops).
• Land alone (without a residential building).
• Properties held in a SIPP / pension scheme (in most cases).

The "replace your main residence" rule

The most common ADS-relief situation: you're buying a new main home but haven't sold the old one yet.

If you complete the new purchase while still owning the old main home, you pay the 5% ADS upfront. But you can claim a refund if you sell the old home within 36 months.

Refund mechanics

1. Pay the ADS at completion (via your solicitor).
2. Sell your previous main home within 36 months.
3. Apply for refund within 12 months of selling the old home, OR within 12 months of the new property's completion date — whichever is later.
4. HMRC processes refund (typically 4-8 weeks).

The refund is the full 5% surcharge, with interest at 0.5% above Bank Rate.

Many home-movers don't realise this is available — particularly people downsizing in a fragmented chain. Worth thousands.

When the 36-month rule doesn't help

You can't reclaim ADS if:

• The old property was held in your spouse's sole name (different beneficial owner).
• You sold the old property more than 3 years before buying the new one (no reclaim).
• The new property is for someone else (parent, adult child, friend).
• You own two main homes and treat one as primary (HMRC will challenge).

Joint purchases — one ownership taints all

If any joint purchaser owns another residential property, the entire purchase is subject to ADS — regardless of the others' situations.

Common pitfall: parents helping a first-time buyer son/daughter onto the property ladder by joining the mortgage. If the parents own their own home (almost always do), ADS applies to the whole purchase — and the FTB son/daughter loses both FTB relief AND incurs ADS. Painful.

Workaround: parents fund via a gift rather than joint purchase, or use a JBSP (Joint Borrower, Sole Proprietor) mortgage where the parent supports affordability but isn't on the deed.

Scotland (LBTT) and Wales (LTT)

Scotland — Additional Dwelling Supplement

• 8% of entire price (raised from 6% in December 2024).
• Properties under £40,000 exempt.
• 18-month refund window for replacement of main residence.

Wales — Land Transaction Tax higher residential rates

Wales uses a different mechanism: higher residential rates apply across all bands rather than a simple surcharge. The effect is similar — roughly 4% additional tax on second homes.

A £300,000 second home in Wales: rougly 4% × £180k + 7.5% × £70k + 9% × £50k = £7,200 + £5,250 + £4,500 = £16,950.

Strategic considerations

Owning multiple homes long-term

If you intend to own a second home indefinitely:

• Buy in Scotland (LBTT 8%) costs more than England (5%).
• BTL property in personal name faces Section 24 mortgage interest restrictions.
• Limited company BTL avoids Section 24 but triggers SDLT on incorporation.

Family help with deposits

Avoid joint mortgages with parents who own their own home. Use:

• Gift — parents transfer money. Subject to 7-year IHT rule but no SDLT impact.
• JBSP mortgage — parents on the mortgage but not the deed.
• Loan with proper documentation — careful, can affect mortgage affordability.

Couples with one existing property

If one partner owns a property and the other doesn't, and you buy a new "main residence" together:

• If you both move in and the old property is sold within 36 months — full refund possible.
• If the old property becomes a BTL or is kept — ADS applies and isn't refundable.

What about company purchases under £500k?

Companies pay SDLT from £0 (no nil-rate band) on residential properties they buy. Plus the 5% ADS. Plus, for properties over £500k, the "15% flat rate" applies — punitive for purchases by corporate entities that aren't trading as PRS landlords.

This is one reason personal-name BTL sometimes still beats corporate BTL on SDLT economics despite Section 24 — the entry tax is much lower for individuals.

Try the numbers

Sources

• HMRC: SDLT: higher rates for additional dwellings
• HMRC: SDLT manual
• Revenue Scotland: LBTT Additional Dwelling Supplement
• Welsh Revenue Authority: LTT higher residential rates
• HM Treasury: October 2024 ADS increase from 3% to 5%