Buying a second home or buy-to-let property

There are currently more than four million Brits who own a second property, but if you want to join the ranks, there’s a lot to think about first.

You’ll need to give careful thought to why you are buying, what you’ll do with the property and consider the impact of the additional costs, including stamp duty land tax. 

However many homes you have bought for yourself, there’s more to think about with second properties, so it’s worth consulting a mortgage broker or using Unbiased’s mortgage calculator to see how much you may be able to borrow.

We’ll now address these questions in more detail.

Why do you want a second property?

There are many reasons why people buy more than one home. 

Maybe you work in a city but prefer country life, and want more space and fresh air at the weekends, but a local place during the week.

You might want a holiday home to enjoy yourself and to provide an additional source of income.

Alternatively, you may have a large sum of money to invest in property so you can get some practical use from it while it hopefully increases in value.

Other people might buy a run-down property, redevelop it and sell it on for profit.

It’s important to understand your motivations for buying a second home, as this will have a fundamental impact on your choice of property.

What are the additional costs of buying a second property?

The property that you consider your main home is known as your primary residence, or principal private residence if you want to get technical.

Any additional property you own, including buy-to-let property, is known as a secondary residence.

If you are going to get a second mortgage, you’ll usually need at least a 15%-20% deposit or 25% for a buy-to-let mortgage. Some lenders may require as much as 40%.

This is more than you’d typically require to buy your primary home. This is because lenders consider second mortgages to be higher risk.

What is stamp duty?

When you buy any property, you have to pay stamp duty land tax on the purchase.

When you buy a secondary residence, you have to pay an extra 5% surcharge on top of the usual stamp duty. Unlike stamp duty for your first home, a surcharge applies to properties under the value of £250,000.

In April 2025, the rates increased, so you’ll now have to pay stamp duty of 5% on the first £125,000, 7% on the proportion between £125,001 and £250,000, 10% on the proportion between £250,001 and £925,000, 15% on the portion between £925,001 to £1.5 million and 17% on the portion above £1.5 million.

In Wales and Scotland, there are different stamp duty rates on additional properties

What is capital gains tax (CGT)?

A secondary residence will also be subject to capital gains tax (CGT) when it’s sold, if its value has increased since you bought it.

Only the growth in value is taxed, and your annual CGT allowance, currently £3,000 in the 2025/2026 tax year, should reduce the taxable amount. But note this will only apply in the year that you sell.

If you’re selling, a financial adviser may be able to help you work out how much you need to pay.

The rate of CGT you pay will depend on whether you pay higher or basic rate tax (once your capital gain is taken into account). The rate for basic rate taxpayers is 18% and 24% for those that pay the higher or additional rate of tax.

CGT isn’t charged when you sell your main home.

Second homes and council tax

You’ll usually need to pay council tax on any second home, which includes furnished homes with no one living there. In many cases, the charges on second homes are higher.

Although it’s rare, it’s possible you may be eligible for a discount, so it’s worth contacting your local council to check.

Some councils provide a 50% discount for council tax on second homes if the bill payer must live elsewhere in job-related accommodation due to the terms of their employment. 

However, some homes in England that are left empty and substantially unfurnished for more than one year are now subject to a council tax premium of up to 100%.

If the property is left empty for five years or longer, you could face a premium of 200% or more.

These reforms are designed to help tackle the issue of empty properties, making it easier for people to find affordable housing in their local communities.

Furthermore, as of April 2025, councils can charge a council tax premium on all second homes in their area, not just unfurnished homes.

Additional council tax charges are referred to as the ‘second homes premium.’ It’s important to check how much you’ll need to pay before you make your purchase.

Utility bills, maintenance and renovation costs

It’s always a good idea to make sure you can afford monthly bills for your second property, including insurance and energy bills.

You should also have money set aside for maintenance and renovation costs.

What are the tax implications of buying a second home?

You’ll have to pay income tax on your second property if you choose to rent it out.

The amount of tax you’ll pay depends on your profits and tax band – and you should be wary that your rental income could push you into a higher tax band, so you’ll pay more.

However, you can deduct expenses from letting out your property, such as estate agent fees, maintenance and repairs and accountant fees.

Also, if you have a mortgage for your second home, you can get a tax credit based on 20% of your mortgage interest.

How do I let out my second home?

Even if you didn’t have buy-to-let in mind, you may decide to let your second home so it generates income rather than sitting empty.

This can also be a good way to keep the property maintained if you pick responsible tenants.

However, to do this, you’ll need to remortgage the secondary residence to a buy-to-let mortgage, as you can’t let a property on an ordinary homebuyer’s mortgage.

Alternatively, you could let out your current home and move into the second property, but this would mean switching the first home to a buy-to-let mortgage.

What is ‘let-to-buy’?

This essentially means letting out the property you currently live in so that you can buy a new home. You might try this if you’re struggling to sell your home or if you want to keep it as an investment.

Another reason for a let-to-buy may be to free up cash for a deposit on a secondary residence.

Assuming you own enough equity, you could remortgage your current home to release some of that value as a cash sum.

However, this can be complex and risky, so consult a mortgage adviser about the practicalities.

Can I make money as a property developer?

One popular reason for buying a secondary property is to profit from a strong housing market.

The usual approach is to buy a cheap property that probably needs a lot of work, renovate or extend it, and then quickly sell it when it’s finished.

Managing the risks and costs of development

During a property boom, this can be lucrative, but it is high risk – if the market stalls or crashes (as it has done in the past), you can lose a lot of money and be left with a half-finished home you can’t sell.

You’ll also need to make sure you have enough money set aside to pay for the work the property needs, bearing in mind that estimated costs usually rise considerably.

If you’re tempted by this route, aim to have a safety margin to cushion you if prices don’t rise as you hoped or if the property takes longer than expected to sell.

If you’re a DIY fan and enjoy a big project, talk to a mortgage adviser about how to make it happen.

Can I use my holiday home as an AirBnB or similar holiday let?

Buying a property for holidays has many attractions if you love a place enough to go there every year. And when you’re not using it yourself, you can rent it out to holidaymakers.

Some people choose a purpose-built property to save on tax, but they may not have planning permission to be residential all year round, which may affect your future if you want to move there.

The good news is you may not need a buy-to-let mortgage, as it can be a normal residential mortgage if you only let it for a few weeks a year.

If you plan to let your property regularly, you need a holiday let mortgage. Renting out your holiday home may have tax implications, so discuss this with a financial adviser.

Understanding the new tax rules for holiday lets

Furthermore, in April 2025, the tax rules for holiday homes changed to bring them into line with other buy-to-let properties.

This will mean some owners may end up with a bigger tax bill. 

The tax changes include:

• Tax relief on mortgage interest will be reduced to a 20% tax credit.

•  CGT will be brought in line with other residential properties with fewer reliefs available.

• Rules on allowable expenses will become less generous.

• Rental income will no longer be counted towards your income for pension contributions, meaning you could get less pension tax relief.

I’m helping a family member onto the property ladder

If you’re a homeowner and are buying a home with a relative, this will count as a secondary residence, and you’ll have to pay the stamp duty surcharge.

For alternative options on how to help your children buy their first home, see our article on the bank of mum and dad.

I’m buying a second property to start a business

If the property you’re buying is partly for business purposes and partly residential, then it will be classed as a mixed-use property.

A mixed-use property may mean lower stamp duty, but you will have to pay other taxes.

Having second thoughts about buying second home?

A good rule of thumb is that if you took care buying your main home, you should take extra care when buying a secondary residence.

You should start by finding a mortgage broker who specialises in this area. Unbiased can quickly connect you with a mortgage adviser who can help you on your property buying journey. 

Did you find this article helpful? You may also find our article on the advantages and disadvantages of renting vs buying and consent to let useful.

Get expert mortgage advice

Whether you're investing in a buy-to-let property to generate rental income or purchasing a second home for your own use, the process can be complex.

Careful planning is essential, as there will likely be extra costs, tax implications, and legal requirements to consider.

By fully understanding the financial aspects, you can ensure that your second property supports your long-term objectives effectively.

Let Unbiased match you with a qualified mortgage broker who can help you navigate the complexities of buying a second home or securing a buy-to-let mortgage.