Stamp duty refunds- new homeowners

Stamp duty is payable upon purchasing property and can be a large additional cost for homebuyers to pay.

In some circumstances, you may be eligible to a stamp duty refund. However, in recent months there have been many agencies that have been cold calling homeowners to tell them they will be eligible for a stamp duty land tax refund and making spurious claims to HMRC. This has left some homeowners potentially facing penalties and paying interest on unpaid tax.

In this blog we cover exactly when and how much you may be able to claim on a stamp duty refund. Read on to find out more.

What Is Stamp Duty?

Stamp duty land tax (SDLT) is a tax that is paid on property purchases. You will pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price when you buy residential property.

SDLT only applies to properties over £250,000.

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.

How much is stamp duty?

Stamp duty rates rise as the property price increases. The amount you will pay is calculated according to the proportion of the property price that falls into each band.

Stamp duty land tax rates

Here are the latest SDLT rates:

Property or lease premium or transfer value 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%

SDLT when buying your first home

You can claim a relief (a discount) if the property you buy is your first home. If you are a first-time buyer, you the SDLT rates are as follows:

• no SDLT up to £425,000.
• 5% SDLT on the portion from £425,001 to £625,000.

You’re eligible if you and anyone else you’re buying with are first-time buyers.

If the price is over £625,000, you cannot claim the first time buyers relief.

What Is the Stamp Duty Surcharge?

If you’re buying another home which you won’t be living in, you may well be liable to pay extra stamp duty. This second home may be a rental property, or a holiday home or a second residence.

The higher SDLT rates

The higher stamp duty surcharge rates for second homes are:

The higher rates from 23 September 2022

Property or lease premium or transfer value SDLT rate

Up to £250,000 3%

The next £675,000 (the portion from £250,001 to £925,000) 8%

The next £575,000 (the portion from £925,001 to £1.5 million) 13%

The remaining amount (the portion above £1.5 million) 15%

Stamp duty will also be payable if you bought your new home before selling your previous one. However, in this case, you may be entitled to a refund, when you do eventually sell your previous main home.

When do I pay stamp duty?

Any stamp duty owed must be paid within 14 days of completing your house sale or you risk paying interest on the tax owed and potentially facing penalties from HMRC.

Am I eligible for a stamp duty refund?

Buyers can submit a stamp duty refund claim if they sell their main residence within three years of completing on a new home.

If you bought your new main residence on or after January 1, 2017, you may be eligible to apply for a refund.

The refund is for the 3% additional surcharge you will have paid. That is the amount above what you would have been charged had the house not been an additional property.

There could be many reasons why property owners must pay the 3% surcharge in the first place for example:

• The sale of your main residence falls through, but you continue to buy your new home before you complete the sale of your old home.
• Owning two homes for a period may be because of separation or divorce.
• You purchase a second home as a holiday home but decide to move permanently into that home and sell your previous main residence.
• You own a home and decide to rent this out when you buy a shared new home with a new partner.

How do I claim a stamp duty refund?

We would advise that you seek advice from a professional advisor to ensure you are eligible before you make a claim.

However, you can apply using an online form on the HMRC website or print and post it directly to HMRC.

To apply online, you need a Government Gateway user ID and password. If you don’t have a Government Gateway user ID and password, you can create one before you make your claim.

HMRC aim to process repayments within fifteen working days from the date the claim is received.

Information you need to make a SDLT refund claim

Below is a list of all the relevant information you will need to make a SDLT refund claim:

• 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 for.
• Bank account and sort code details of the person to receive the payment.

Claiming your refund

Whilst it may be worth using an accountant such as dns accountants to make your claim on your behalf, be careful of any agencies or companies cold calling you offering to make a claim on your behalf. See below for more details.

Here at dns accountants, we have qualified tax advisors who will advise you to only make a claim where you meet the right criteria. We do not make false claims to HMRC.

Beware of spurious refund claims by rogue tax repayment agents

In the last few months there has been much in the media to about rogue tax repayment agents making spurious refund claims on behalf of clients. This can leave clients with large tax bills if a rogue claim is made.

After a recent spate of Stamp Duty refund claims, HMRC have warned that many of these claims failed to meet specific criteria.

These agents are making cold calls based on information from land registry records and property search websites promising money back. HMRC believe that up a third of claims for multiple dwelling relief refunds were wrongly completed.

Many agents have left their clients high and dry after submitting claims and HMRC raises an enquiry. Incorrect refund claims will not only have to be repaid with interest but can attract HMRC penalties.

HMRC has nine months to enquire into a claim and would look to recover the full tax, with interest, and penalties charged where appropriate from those found to be incorrect.

We would advise that you only pursue a claim through accountants like dns accountants that specialise in SDLT and SDLT reliefs and exemptions.

Summary

The stamp duty surcharge is designed to be paid by people who purchase second properties. However, there are some circumstances where you may have paid this surcharge and your circumstances change. In these cases, you may be due a stamp duty refund.

Tax refund claims can often be complicated to understand if you do meet the criteria required for the refund. This is where a professional tax advisor such as our experts at dns accountants can advise you to avoid you making a spurious or false claim.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.