Do holiday lets owned personally trigger the 5% SDLT surcharge on a new main residence?

Introduction

People often search for this issue when they are buying a new home to live in, but already own one or more other properties. A common point of confusion is whether holiday lets, furnished holiday accommodation, or properties assessed to business rates still count as “dwellings” for Stamp Duty Land Tax purposes.

The short answer is that they often do. If a buyer still owns another dwelling at the effective date of the purchase, the 5% higher rates for additional dwellings can apply unless the purchase qualifies as a replacement of an only or main residence.

The Question

A married couple plan to buy a house in their personal names as their new main residence for about £710,000. They previously sold their former home in March 2021. After that, they lived with family for a period and then in rented accommodation.

They also own, in their personal names, two properties on a single title in Wales. Those properties were bought after the former home was sold, were in poor condition when acquired, and have since been renovated and used as holiday lets. They are subject to business rates and a commercial-style holiday let mortgage. The couple have never lived in them.

They also have other rental properties held through special purpose vehicle companies.

The question is whether the purchase of the new home qualifies for ordinary residential SDLT rates, or whether the 5% higher rates apply because of the personally owned holiday let properties.

Nick’s Explanation

Nick’s reasoning was that the key issue is whether the buyers are replacing an only or main residence within the meaning of Schedule 4ZA to the Finance Act 2003.

He explained that the higher rates do not apply if the new home is intended to be the buyer’s only or main residence and the buyer disposed of a previous only or main residence within the three years before the new purchase. In anonymised form, his view was:

“There is one potential route for avoiding the 5% higher rate, but it depends on whether a former main residence was disposed of within the three years before completion of the new purchase.”

Once the further facts were provided, Nick concluded that the exception was not available because the former main residence had been sold more than four years before the planned completion date.

He also explained that the holiday lets still counted as dwellings for SDLT purposes, despite being run commercially and assessed to business rates, because the relevant question is whether they are suitable for use as dwellings. By contrast, properties held by a company do not usually count as personally owned dwellings of the individual shareholders or directors.

The Law

The higher rates of SDLT for additional dwellings are set out in Schedule 4ZA to the Finance Act 2003.

For most individual buyers, the key rule is paragraph 3(4). Broadly, the higher rates apply if, at the effective date of the transaction:

• the buyer is purchasing a major interest in a dwelling,
• the chargeable consideration is £40,000 or more,
• the dwelling is not subject to a lease with more than 21 years left, and
• the buyer already owns a major interest in another dwelling worth £40,000 or more, unless the purchase is a replacement of an only or main residence.

A “major interest” is defined by Finance Act 2003, section 117(2), and generally means a freehold or a leasehold estate.

The main exception is in paragraphs 3(6) and 3(7) of Schedule 4ZA. Broadly, a purchase can be treated as replacing an only or main residence if:

• the buyer intends the new property to be their only or main residence,
• the buyer disposed of a major interest in another dwelling within the previous three years,
• that disposed-of dwelling was at some time the buyer’s only or main residence, and
• no other disqualifying facts apply.

Whether another property is a “dwelling” depends on the statutory definition, including whether it is suitable for use as a dwelling. A property can still be a dwelling for SDLT even if it is let commercially, used as holiday accommodation, or entered in the business rates system.

In cases where buyers argue that a property was uninhabitable and therefore not a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. The Court of Appeal confirmed that the condition needed to take a property outside the definition of a dwelling is significant. Serious disrepair, renovation needs, or non-standard use will not automatically be enough.

Analysis

Step 1: Is the new purchase a dwelling?

Yes. A house being bought to live in as a main residence is plainly residential property for SDLT purposes.

Step 2: Will the buyers own another major interest in a dwelling at completion?

Yes, on the facts given. The couple personally own two holiday let properties on one title. Because they are held in their own names, those interests are counted when testing the higher rates.

Step 3: Does it matter that the holiday lets are run commercially and assessed to business rates?

Usually no. Business rates treatment does not by itself prevent a property from being a dwelling for SDLT. Nor does use as holiday accommodation. The key question is whether the properties are suitable for use as dwellings. Renovated holiday lets will commonly meet that test.

Step 4: Does it matter that the properties were once derelict?

Not in itself. The relevant question is their condition at the effective date of the new purchase, not simply their state when first bought. If they have been renovated and are now being used as holiday lets, that strongly suggests they are suitable for use as dwellings.

Step 5: Could the buyers rely on replacement of main residence relief?

No, not on these facts. Their former main residence was sold in March 2021, and the new purchase is taking place more than three years later. That falls outside the statutory three-year window in paragraph 3(6).

Step 6: Do the other rental properties held in company structures count?

Generally no, not as personal ownership by the couple. If a limited company owns those properties, the company holds the major interest, not the individuals. That is why Nick distinguished between the personally owned holiday lets and the properties held in SPVs.

Step 7: Is there any realistic argument that the surcharge should not apply?

On the facts provided, the answer is likely no. The buyers are not replacing a former main residence within the statutory time limit, and they still personally own other dwellings at completion.

Outcome

The practical conclusion is that the purchase of the new main residence is likely to be subject to the 5% higher rates of SDLT for additional dwellings.

That is because:

• the buyers still personally own other dwellings at completion, and
• the sale of their previous main residence took place more than three years before the new purchase, so the replacement exception is not available.

The fact that the other properties are holiday lets, commercially financed, or assessed to business rates does not usually change that result.

Practical Steps

If you are in a similar position, the main points to check are:

• the exact completion date of the new purchase,
• the exact date you disposed of your previous only or main residence,
• whether any other property is still owned by you personally at completion,
• whether those other properties are genuinely “dwellings” at the effective date, and
• whether any property is owned by you personally or instead by a company or trust.

You should also review the condition of any allegedly uninhabitable property carefully. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for saying a property is not suitable for use as a dwelling is relatively high.

If any restructuring is being considered before completion, timing and legal effect matter. A transfer after the effective date will not help for that purchase, and a pre-completion transfer can itself trigger tax and legal consequences.

Conclusion

If you buy a new home to live in but still personally own holiday lets or other dwellings, the 5% SDLT surcharge will usually apply unless you are genuinely replacing a previous main residence within the statutory three-year window. Commercial use and business rates treatment do not, by themselves, stop a holiday let from counting as a dwelling.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraph 3(4)
• Finance Act 2003, Schedule 4ZA, paragraphs 3(6) and 3(7)
• Finance Act 2003, section 116(1)(a)
• Finance Act 2003, section 117(2)
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

See all questions and answers categorized in this sitemap. Or use Google site search below.