Service: Taxation 

Sector: Property 

Stamp duty represents a major upfront cost for home buyers

By Lynn Lin & Sarah Burns

21 Apr 2022

Stamp duty represents a major upfront cost for homebuyers, in addition to the deposit and other fees (valuation, legal, surveyor, etc.). 

Whilst paying it is a legal requirement, some buyers may find that they have overpaid or are eligible for a retrospective exemption – in other words, they qualify for a refund.

What is stamp duty?

Stamp duty, or Stamp Duty Land Tax (SDLT), is a standalone tax on property or land purchased in England and Northern Ireland. The tax is different if the property or land is in Scotland or Wales. The amount you pay depends on the value of the property (or land) you are purchasing, whether you are a first-time buyer and whether you own property already. The SDLT Return is normally prepared by a solicitor and must be filed (and any payment made) within 14 days of completion.

If you are a first-time buyer, you will be entitled to a discount (relief). This means that you will pay no stamp duty on a property worth up to £300,000, and 5% on the portion from £300,001 to £500,000. If the price exceeds £500,000, you will not be eligible for tax relief.

If you are not a first-time buyer, the standard SDLT rates depend on which band your property price falls into:

Property or lease premium or transfer value SDLT rate
Up to £125,000 Zero
The next £125,000 (the portion from £125,001 to £250,000) 2%
The next £675,000 (the portion from £250,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million) 12%

Source. Gov.uk

To help you work out how much you need to pay, the Government offers a Stamp Duty calculator; however, this cannot be relied upon in all circumstances, and advice should be sought if in doubt.

What is the stamp duty surcharge?

An SDLT surcharge may also apply to those who are purchasing a buy-to-let property as a private landlord or limited company, or those who are buying a second home worth £40,000 or more. You will not pay the extra 3% SDLT if the property you’re buying is replacing your main residence and has already been sold. The relevant rates are:

Purchase price Stamp duty surcharge rate  
Up to £125,000 3%
Over £125,000 5%
Over £250,000 8%
Over £925,000 to £1.5 million     13%
Over £1.5 million 15%

Source: Gov.uk

Different rates of SDLT apply to purchasers of residential property in England and Northern Ireland who are not residents of the UK. The rates are two percentage points higher than those that apply to purchases made by UK residents. This surcharge applies to purchases of both freehold and leasehold property, as well as increasing the SDLT payable on rents on the grant of a new lease. The surcharge also applies to certain UK resident companies that are controlled by non-UK residents.

Am I eligible for a stamp duty refund?

There are a few reasons why you may be able to claim a refund:

  • you own a second home and sell your main residence within three years of paying the stamp duty surcharge (provided that your second home then becomes your main residence); 
  • your home has a self-contained annex which does not exceed one-third of the property's total value. Thanks to a rule change in 2018, properties with this kind of annex on their grounds are now regarded as a single home;
  • you purchased a shared ownership property as a first-time buyer on or after 22 November 2017;
  • you purchased a buy-to-let property which was unsuitable for immediate habitation;
  • the tax you originally paid was miscalculated in the Government's calculator – it recently emerged that this tool hasn't always been accurate.

A refund is only available on the surcharge element of your SDLT liability, i.e. the 3% surcharge if you own more than one property, and/or the 2% surcharge payable by non-UK residents who spend sufficient time in the UK. The main SDLT charge itself cannot be refunded.  

It is noted though that a refund is only available to purchasers who are individuals, that have spent 183 days in the UK in any continuous 365-day period:

  • starting no more than 364 days before the effective date of transaction
  • ending no more than 365 days after the effective date of the transaction

The effective date of the transaction is usually the completion date.

How can I apply for a refund?

You can do so online or via post. Be wary of 'no win, no fee' solutions, as they will likely take a hefty cut of your refund.

If you sold your previous main residence on 28 October 2018 or earlier, HMRC must have your request within three months of the sale of that previous main residence, or within 12 months of the filing date of the return relating to the new residence, whichever is later.

If you sold your previous main residence on 29 October 2018 or later, HMRC must have your request within 12 months of the sale of that previous main residence, or within 12 months of the filing date of the return relating to the new residence, whichever is later.

HMRC offers some leeway where delays arose due to Covid or some other exceptional circumstance. Each case will be considered on its own facts.

How long will my refund take to come through?

HMRC state that claims are meant to be processed within 15 days; however, given their current backlog post-Covid, delays should be expected.

Find out more

If you need any help with your stamp duty refund application, please get in touch with our team today.

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