Of course there are a number of matters to consider before investing in a second home and the process of doing so can be very different from when you purchased your first or ‘main’ residence.
Until fairly recently the must-have second home was a rundown farmhouse in France – nowadays properties abroad have become less attractive (leaving aside the obvious current travelling restraints surrounding the pandemic) as budget airlines have cut back on their destinations and the pound has weakened rendering foreign renovation projects and property investments less cost-effective.
‘Staycations’ are as popular now as they have ever been. The benefits of purchasing a second property nearer to your main residence are vast. A holiday home within 2 – 3 hour drive, in the country or on the coast is a realistic regular weekend retreat.
The UK’s top holiday home locations are some of the most picturesque and quaint places in the world, whilst also being served with some of the country’s top restaurants and leisure activities.
Are you buying a rental property or your dream holiday home? For business or pleasure?
There are some important differences between these. For example a purpose built holiday home may not have planning permission as a year round residence. This is something to consider if you want your regular weekend retreat to ultimately become your retirement haven.
Finance
Unless you are a cash buyer you will need to obtain a mortgage on the second property or re-mortgage your current residence. There are various mortgage products out there depending on your circumstances and your intentions with the property.
Tax
The first tax to consider is the ‘additional rate’ stamp duty land tax (SDLT) applicable to second / additional properties. This is an extra 3% on top of the ‘normal’ rate of SDLT. However it’s not only normal rate SDLT payers that are able to benefit from the Government’s current SDLT holiday – the extra 3% still applies but someone buying a second property will benefit from the waiving of the ‘normal’ rate of SDLT. For example an additional property purchase at a price of £300,000.00 before the SDLT holiday would attract SDLT of £14,000.00 whereas today (during the SDLT holiday) it would be £9,000.00
Sometimes the line between your main and second residence are somewhat blurred, so decide which property will be your main residence early on as this will have an effect on the tax applicable. There may be Council Tax reductions available but there may also be Capital Gains Tax payable when the property is sold in the future as well as income tax to pay on any rental income.
