Claiming SDLT refunds on second homes

Stamp duty land tax (SDLT) is part of the property buying process in the UK. However, in some circumstances, some buyers may overpay or qualify for SDLT refund in retrospect.

If you purchase a second home or a second property such as a holiday home or a buy-to-let property, then you will incur an additional 3% surcharge on top of existing SDLT rates (excluding caravans, mobile homes or houseboats). However, there are certain circumstances when a SDLT refund may be claimed.

In this blog we’ll look at some of the reasons why a stamp duty refund might be granted, what the procedure is for making a claim, and how long you have to claim back stamp duty paid.

What is Stamp Duty Land Tax?

Stamp duty land tax (SDLT) is a tax levied by the UK government on property transactions such as the acquisition of land and/or property with a value greater than a certain threshold. The tax is calculated based on the property purchase price.

In Scotland you pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT).

SDLT must be paid to HMRC within 14 days of the completion of the purchase or transfer of the property in England or Northern Ireland.

How much tax you pay will be determined by whether the land or property is residential, non-residential, or mixed purpose and whether it is the only or main residence or it is an additional property.

The amount you pay depends on:

• when you bought the property
• how much you paid for it
• whether you’re eligible for relief or an exemption

There are SDLT reliefs and exemptions which you should also be aware of (see below).

Who pays Stamp Duty Land Tax?

SDLT is applicable on the purchase of residential properties (for example your main home, second home or a buy-to-let rental property) worth over £250,000. For first time buyers, you will pay SDLT if you purchase a property or land worth over £425,000.

SDLT is paid by the person buying the property. Typically, your solicitor or conveyancer will file a return to HM Revenue & and Customs (HMRC) and pay any SDLT on the day of completion on your behalf. They will also claim any tax relief that you might be eligible for.

If you don’t have a solicitor or conveyancer to do this for you, you’ll have to file the stamp duty return, online or in the post, and pay the tax yourself.

There may be other circumstances under which you have to pay SDLT including:

• You marry and then buy a property with your partner – even if one of you is a first-time buyer.
• You buy a shared ownership property.
• You purchase a non-residential property above £150,000.
• You buy mixed-use land or property above £150,000.
• You’re added to a mortgage and title deeds (this is classed as "buying" a share of property or land).

You also pay a SDLT surcharge, known as Higher Rate Stamp Duty Land Tax, in the following circumstances:

• You purchase a second property/residence.
• You’re an individual private landlord and you purchase a buy-to-let property.
• You purchase a buy-to-let through a limited company.

However, there are circumstances where a stamp duty refund may be available (read below).

Stamp duty rates

Rates for a single property

You pay SDLT at these rates if, after buying the property, it is the only residential property you own.

You usually pay 3% on top of these rates if you own another residential property.

Stamp duty surcharge

As well as the standard stamp duty payment, a surcharge will be applied if you:

• Are purchasing buy-to-let property as a private landlord or through a limited company
• Are buying a second home for £40k or more
• You already own or are buying multiple properties

For example, if you purchased a property as per above for £500,000, you would pay:

• On the first £125,000 (no stamp duty but 3% surcharge) = £3,750
• Between £125,000 to £250,000 (2% stamp duty and 3% surcharge) = £6,250
• £250,000 to £500,000 (5% stamp duty and 3% surcharge on the final £250,000) = £20,000

Final stamp duty bill £30,000

The stamp duty rates for second homes are:

Stamp duty reliefs and exemptions

You may be eligible for SDLT reliefs in the following circumstances:

• first-time buyers
• building companies buying an individual’s home
• employers buying an employee’s house
• property developers providing amenities to communities
• companies transferring property to another company
• charities buying for charitable purposes
• right to buy properties
• registered social landlords
• Crown employees
• property investment funds, for example Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs)
• You are purchasing in a freeport tax site

You can no longer claim multiple dwellings relief. Multiple dwellings relief (MDR) is abolished and can no longer be claimed for transactions which complete, or substantially perform, on or after 1 June 2024.

Can I get a refund on stamp duty when buying a second home?

Yes, stamp duty can be refunded on second homes but only if certain factors apply.

Second homes usually come with an additional rate of stamp duty to pay. This is called the stamp duty surcharge (see above). Anyone purchasing an ’additional’ residential property will be charged a surcharge on each of the threshold bands. However, if you paid stamp duty and the surcharge, and then you sell your first property shortly after buying your second, you may be able to claim a stamp duty refund on that surcharge you paid.

You will be eligible for a stamp duty refund on your second home surcharge if you sell your main residence within 36 months of paying the additional 3%.

The rules are complex and in recent years many companies have encouraged people to make refund claims that should not have been made through rules being misinterpreted. It is therefore imperative that you seek advice from qualified accountants such as dns accountants before you proceed to make a claim.

If you’re replacing your main residence

You will not pay the extra 3% SDLT if the property you’re buying is replacing your main residence and that has already been sold.

If you have not sold your previous main residence on the day you complete, your new purchase you’ll have to pay higher rates. This is because you own two properties. You can apply for a refund if you sell your previous main home within 36 months.

If it takes longer than 36 months to sell your previous main home

You may still be able to get a stamp duty refund of the extra 3% SDLT if all of the following apply:

• you purchased your new home on or after 1 January 2017
• exceptional circumstances stopped you from selling your old home, for example a public authority blocking the sale (see more below)
• you have now sold your old home

How to claim SDLT refund?

Stamp duty refunds are easy to apply for if you have the right information, knowledge and documentation. To apply for a refund, you can:

• use the online form
• fill in the stamp duty refund application on-screen, print it off and post it to HMRC

To use the online form, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you use the service.

To fill out the form required by HMRC to claim a refund you’ll need the necessary documents and relevant information below:

• Your name and address
• Details of the property that attracted the higher rates of SDLT, including:
  • date of purchase
  • SDLT unique transaction reference number
• Details of the home you’ve sold, including
  • date of sale
  • address of the property
  • name of the buyer
• Amount of tax paid on the property that attracted the higher rates of SDLT
• How much tax you’re asking for a repayment of
• Bank account and sort code details of the person to receive the payment

You will need the following documents as well:

• Proof of identity
• Proof of new property
• Proof of old property sale
• SDLT returns for both properties

How long do I have to claim a stamp duty refund?

There are specific deadlines to follow, so it’s better to make a claim as soon as possible.

If you sold your property on or after October 29, 2018, you have:

• 12 months of the filling from the date you sold your home to make your request to the taxman
• Or within a year of the new residence’s stamp duty filing date, whichever is later

How long does it take to get a stamp duty refund paid?

The stamp duty refund is usually processed up to 15 days after you submit your online form to HMRC.

Can I claim back stamp duty on buy-to-let property transactions?

You will not be able to claim back stamp duty if you have multiple buy-to-let properties.

However, you may be entitled to a stamp duty refund in certain instances. For example, if you have sold your main residence and now live in the original buy-to-let property then you may be eligible for a refund on the original surcharge you will have paid. But this will need to have taken place within 3 years of you selling your main residence.

If you have separated from your partner and have sold your stake in a buy-to-let property, then you may get a stamp duty refund.

If you believe you have overpaid stamp duty for a buy-to-let property or have sold or are looking to sell a buy-to-let property, then get in contact dns accountants today for advice.

What are exceptional circumstances for a stamp duty refund?

Where a purchaser acquires a new main residence on or after 1 January 2017, they may still be eligible for a refund if exceptional circumstances prevented them from selling their previous main residence before the expiry of the 3-year time limit.

An extension to the time limit will only be granted if HMRC is satisfied that the person:

• was prevented from disposing of their previous main residence within the 3-year time limit due to exceptional circumstances that could not reasonably have been foreseen, and
• sold the previous main residence as soon as they reasonably could after ceasing to be so prevented

The main residence must be sold before HMRC will consider whether the circumstances are exceptional. There is no pre-transaction clearance facility.

HMRC needs to be satisfied that those circumstances did genuinely prevent the person from selling their previous main residence within the 3-year period.

The purchaser will need to make clear:

• what the exceptional circumstances were,
• how and why these exceptional circumstances prevented them from disposing of their previous main residence,
• why the circumstances were not foreseeable and
• evidence that as soon as they reasonably could, after the exceptional circumstances ended, they sold their previous main dwelling.

Stamp Duty tax refunds - 3% stamp duty surcharge on second homes - Make a claim today!

Stamp duty refunds are available if you meet certain eligibility criteria.

If you have in the last 36 months had to pay the additional 3% surcharge for owning a second property and you have since sold your main residence, then you should check if you are eligible to make a stamp duty refund claim.

Here at dns accountants we are expert UK property accountants and deal with people with additional properties, landlords property portfolios or simply people with SDLT queries.

Contact us today if you have more than one property, feel you may have overpaid stamp duty, want to claim back stamp duty, apply for an SDLT refund or any have other queries about SDLT. Call us today on 03300 886 686 or email on enquiry@dnsaccountants.co.uk

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