For those of us lucky enough to be able to afford a second permanent residence, you might be looking to buy in Wales with its stunning coastlines, scenery, and pretty coastal villages. But, can you buy a second home in Wales?
The legalities around buying a second home can be tricky to unravel so in our helpful article we will give you everything you need to know as to whether you can buy a second home and benefit from all Wales has to offer.
You can buy a second home in Wales but you will have to pay at least the same amount of council tax as on your first home. Stamp duty is 4% payable on properties up to £180,000, rising to 16% for properties over 1.5 million. Avoid these duties by being a guarantor or purchasing a house below £40,000.
With the brief answer in mind, in order to more easily understand if you can own a second home in Wales, let’s first take a look at what actually constitutes a ‘second home’.
What is a second home?
According to legalities not only in Wales but also in the rest of the United Kingdom, there isn’t a common understanding of exactly what a ‘second home’ is, other than it’s simply not the main home of the owner.
However, there are a few non-legal, general ways they are defined. These are:
- How long the house is used during the year
- The type of property, for instance, is it purpose-built or part of an original house converted into a second home?
- The purpose and use of the house
One of the main ways a second home is defined in the U.K. and more especially concerning those in Wales, is whether the homes will be used just for pleasure and the owner’s sole use, or if the second house is to be used commercially, such as a holiday let.
“There isn’t a common understanding of exactly what a ‘second home’ is, other than it’s simply not the main home of the owner.”
How many second homes are there in Wales?
If you are thinking of getting a second home in Wales, you will be in good company as the number of people owning a second property runs into tens of thousands.
According to official government figures, there were 24,873-second homes in Wales registered for council tax purposes in January 2021.
How much will it cost me for a second home in Wales?
If you have a second home in Wales or one that’s been left empty for more than a year, local authorities here are the only nation within the U.K. with powers to enforce a council tax premium at the full 100%.
According to a recent BBC news story, from 2022, any second homeowner in Pembrokeshire will not only have to pay 100% council tax, but it could also be up to 100% more than they paid previously.
The areas of Gwynedd and Swansea have already implemented this increase so Pembrokeshire becomes the third county in Wales to enforce this new council tax increase.
Council tax can be a costly issue for second homeowners in Wales, but are there any other costs you should be aware of?
“Local authorities here are the only nation within the U.K. with powers to enforce a council tax premium at the full 100%.”
Stamp duty in Wales is known as Land Transaction Tax and is commonly abbreviated and better known as LTT.
This new surcharge was introduced and approved by the National Assembly for Wales in 2020 and is a higher rate than previously enforced.
When you purchase a buy-to-let property or a second home in Wales, you will have to pay LTT tax based on the cost of the property. If you buy a second home or buy-to-let property in Wales, you’ll need to pay an LTT surcharge of 4% on the normal residential rates. The 4% surcharge was introduced on 22 December 2020.
For your reference, here is the cost of each home and its related LTT percentage rate.
- 4% for second homes up to £180,000
- 7.5% for second homes between £180,001 and £250,000
- 9% for second homes between £250,001 and £400,000
- 11.5% for second homes between £400,001 and £750,000
- 14% for second homes between £750,001 and £1.5m
- 16% for second homes costing over £1.5m
It is worth knowing, however, that if you sell your first property within 3 years of your second home purchase you can request a refund by submitting an LTT amendment and refund form to the Welsh Revenue Authority.
“When you purchase a buy-to-let property or a second home in Wales, you will have to pay LTT tax based on the cost of the property”
Can I avoid stamp duty or LTT on a second house in Wales?
If you are looking to buy a second home in Wales, there are ways in which you can avoid some of the expenses involved, specifically stamp duty.
Buy a caravan, motorhome, or houseboat
Not every type of property is automatically charged with stamp duty. Caravans, motorhomes or boats do not have stamp duty on them, so might be a way of securing a bolthole in Wales without having added costs such as the LTT.
Purchase property worth less than £40,000
Another way to get around paying second-home stamp duty tax is to buy a property worth less than £40,000. This might be achievable depending on which area you are looking to buy your second home in and also the type and size of your property.
“Not every type of property is automatically charged stamp duty”.
Tips on buying a second home in Wales
Having a base in beautiful Wales with breathtaking scenery means you can enjoy everything it has to offer year after year.
You may also think about renting it out to tourists and other holidaymakers during the times you won’t be visiting. This can be a great revenue source.
If you choose to let out your holiday home you may need to get a specific holiday let mortgage. Ask one of our specialist conveyancers, who’ve had many years experience in helping those looking for a second property in Wales.
Another way to buy a second property is by using any equity you hold in your existing home. This means rather than getting an additional mortgage for the second home, you can remortgage.
For those of you who are mature second home buyers. There are specific retirement interest-only mortgages available to help you release some of the equity from your original mortgage. These are generally known as ROI mortgages.
This type of mortgage means you only pay the interest on the mortgage upon your death, at which point the house is sold and the loan is repaid.
So we hope that’s given you some thoughts on buying second properties in Wales, one of the most outstanding areas of natural beauty in the U.K.
If you have decided to take the plunge and opt for a second home, then don’t forget to get in touch with our expert legal conveyancers to make the transaction as smooth and stress-free as possible.
With one designated contact we will ensure you are kept up to date each step of the way with your second home purchase.