What is stamp duty tax and is it refundable?

Stamp Duty Land Tax (SDLT) is something people have to pay when they make a property purchase in the UK over a certain price.

Stamp duty rates and rules can be complex to understand and many people miss out on potential stamp duty land tax refunds because they dont have the knowledge of the complex SDLT rules. In some circumstances stamp duty land tax is refundable or can be reclaimed.

In this blog we look at Stamp Duty Land Tax and the circumstances under which you may get stamp duty refunds.

What is stamp duty land tax?

Stamp duty land tax (SDLT) is a tax levied by the UK government on 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.

The rates payable are generally determined by whether the land or property is residential, non-residential, or mixed purpose.

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). Find out more about Stamp duty land tax reliefs and exemptions here.

Who pays Stamp Duty Land Tax?

Stamp Duty Land Tax is applicable if you purchase a residential property (for example a buy-to-let or your home) 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 stamp duty land tax on the day of completion on your behalf. They will also claim any tax relief that you might be eligible for.

If you dont have a solicitor or conveyancer to do this for you, you’ll have to file the stamp duty land tax return, online or in the post, and pay the tax yourself.

There may be other circumstances under which you have to pay stamp duty land tax 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 Stamp Duty Land Tax 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.

Stamp duty land tax rates explained

In 2022 the government announced a temporary reduction in the SDLT rates and this SDLT cut will remain in place until 31 March 2025.

Rates for a single property

You pay stamp duty land tax at the rates below if, after buying the property, it is the only residential property you own.

Property or lease premium or transfer value SDLT rate	SDLT rate
Up to £250.000	Zero
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%

If you are buying and are a first-time buyer, you can claim a discount or relief meaning youll not pay any SDLT up to the value of the property of £425,000 and only 5% SDLT on the portion of the purchase price from £425,001 to £625,000. If you are purchasing a first-time property over the value of £625,000 you will not qualify for this relief.

Find out more about stamp duty rates here.

Higher rates for additional properties

If, when you purchase a residential property, you will own more than one dwelling on the day of completion, then you will usually have to pay an additional 3% SDLT on top of the rates above. For example, if you purchase another property and you havent sold your previous main residence/current home on the date you complete your new purchase.

Many people get caught in the trap of having to pay the additional stamp duty land tax payment as they sell their main residence later after purchasing a new property. In these circumstances, you may be eligible for a stamp duty land tax refund.

This additional rate applies to landlords and anyone who purchase buy to let properties. However, if you’re making multiple property purchases, then you may be able to claim Multiple Dwellings Relief (MDR). Multiple Dwellings Relief can be used to reduce stamp duty land tax paid when purchasing multiple properties in the same transaction. See more here.

Stamp duty reliefs and exemptions

You may be eligible for Stamp Duty Land Tax (SDLT) reliefs in the following circumstances:

• first-time buyers
• multiple dwellings
• 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 may be exempt from SDLT in the following circumstances:

• no money or other payment changes hands for a land or property transfer (beware of outstanding mortgages, that will be deemed consideration)
• property is left to you in a Will
• property is transferred because of divorce or dissolution of a civil partnership
• you buy a freehold property for less than £40,000
• you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
• you buy a new or assigned lease of less than 7 years, as long as the amount you pay is less than the residential threshold or non-residential threshold of SDLT
• you use alternative property financial arrangements, for example to comply with Sharia law, where the alternative financial provider pays SDLT when they buy the property under the arrangements.

Am I entitled to make an SDLT refund claim?

There are clear guidelines from HMRC around stamp duty land tax refunds but often the rules are not always straightforward, so seeking advice from an accountant such as dns accountants is advisable.

Here’s a quick summary why buyers may find they are eligible to claim a SDLT refund:

Second home stamp duty refund

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%.

Stamp duty land tax refund for properties with an annexe

If you paid a stamp duty surcharge on a property with an annexe, granny flat, or another smaller building on the grounds of your main home, you might be able to make a SDLT refund claim.

STDL refund on uninhabitable buildings

There may well be an SDLT exemption for uninhabitable buildings or properties. However, this is a grey area as what HMRC believe is uninhabitable and what the average person considers uninhabitable can be very different.

Stamp duty land tax refund claim on outbuildings

Outbuildings such as barns/cottage used for commercial purposes on the grounds of your property could also reduce your SDLT liability. If this has resulted in an overpayment, then you could be looking at a refund.

SDLT refund claim on land and woodland

If your property has agriculture land, paddocks or woodland attached to it, then mixed use rules could potentially save money in SDLT.

SDLT refund claim on mixed use property

A mixed-use property incorporates both residential and non-residential elements. For SDLT purposes, whether a property is residential or mixed-use depends on factors such as the size of the dwelling, the nature of the land, any commercial use on a part of it etc.

Mixed-use properties are taxed at the same rates as commercial properties, which are typically lower than those for residential. Its essential to understand the classification of a property, as it significantly impacts the stamp duty land tax rates applicable.

How long do I have to claim a Stamp Duty refund?

You can apply for a refund if you sell your previous home within 36 months. If you have made an error on an SDLT return, you have 12 months from the filing date to amend your return. The filing date is 14 days after the effective date of your transaction.

You can correct minor errors by phone by calling HMRC. For more substantial errors you’ll need to write to HMRC and in some cases submit a new SDLT return.

If you have overpaid Stamp Duty Land Tax you may claim overpayment relief to recover the overpaid Stamp Duty Land Tax or to reduce an excessive assessment. You can claim this relief for overpayment up to four years after the effective date of the transaction.

Multiple Dwellings Relief claim period

If you are claiming Multiple Dwellings Relief (MDR) your claim has to be filed within 12 months of filing the return or the relief cannot be claimed.

Stamp Duty tax refunds - 3% Stamp Duty on second homes - Make a claim today

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

Contact us today if you feel you may have paid too much SDLT.

What is the process for a HMRC SDLT refund?

To claim a refund after selling your main residence with 3 years or for the non-resident surcharge, the process is below:

• using an online form on the UK governments website
• filling in the form 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.

You can also correct minor errors by phone calling the as follows Stamp Duty Land Tax helpline. Minor errors include the following:

• vendor details
• buyer details on either questions 59 or 70 of the SDLT1 paper return
• some spelling errors in the property address
• question 26 or 72 of your paper return if you’ve received a SDLT8 showing you’ve made a mistake
• wrong title number
• correcting the purchase price or other tax details

For some errors you need to write to the Stamp Duty Land Tax Office. These errors include:

• adding a title number
• purchaser details to either add or remove a purchaser
• adding a property

You should write to the Stamp Duty Land Tax office to cancel a duplicate return.

For more substantial errors, you will need to write to HMRC and in some cases submit a new SDLT return. These errors include:

• you need to change the name of the buyer (unless you simply need to correct a spelling mistake)
• you need to change the property details
• the new effective date is after the date of notification

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

As long as you supply HMRC with all the relevant information, your claim should be processed within 15 days. However, it may depend on the type of claim you are making, in some cases it can take a minimum of 6 weeks or longer.

Can HMRC take back the refund processed?

To process refunds quickly, HMRC will ordinarily make the payment without checking eligibility. We reserve the right not to do so for revenue protection reasons.

This means that even after a repayment has been made, we have not agreed that the refund is due. We have up to 9 months to make a compliance check on your amended return or claim.

If you receive a repayment where the amount you claimed was not due, you must pay it back along with any interest due.

What happens if my SDLT refund claim is not successful?

If your refund claim is not successful and refused by HMRC, HMRC will detail the reasons why your claim wasnt successfuland given 30 days to write to HMRC to give notice of appeal against HMRC’s decision to refuse the refund.

How dns accountants can help with your SDLT refund

The SDLT rules can be complex, so it’s worth seeking expert guidance from dns accountants to find out if you’re eligible for a SDLT refund.

If you need assistance with filing a claim for SDLT refund or you think there are grounds for claiming the stamp duty refund, then please contact us.

Call us on 03300 886 686 or email on enquiry@dnsaccountants.co.uk.

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