Unless you’re buying a property under £250,000, stamp duty is going to be a big chunk of the purchase price. If you’re buying a second home or buy-to-let property, it’ll play an even bigger part. However, there are circumstances in which you may be due a stamp duty refund – and we’ll show you how.
FAQs
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a form of tax that is paid on property purchases. It applies to all purchases made in England and Northern Ireland. Scotland and Wales have their own, similar, tax schemes.
How much is stamp duty?
The amount of stamp duty you pay depends on the value of the property you are purchasing. SDLT is applied in value bands, as follows:
- Up to £250,000 – 0%
- £250,001-£925,000 – 5%
- £925,001-£1.5 million – 10%
- Over £1.5 million – 12%
Can I get a refund on stamp duty?
There are some situations where you can get some of your stamp duty refunded. Alongside the basic SDLT bands, there are also surcharges that you might have to pay. You can reclaim these stamp duty surcharges if you fit the right criteria.
The two main stamp duty surcharges are:
- Purchasing buy-to-let property as a private landlord or through a limited company
- Buying a second home for £40,000 or more
Either of these situations will add 3% to the amount of stamp duty you need to pay.
In what circumstances can I reclaim stamp duty?
You may be able to reclaim the 3% stamp duty surcharge in the following circumstances:
- You are selling or giving away your main residence with 3 years of paying the 3% surcharge.
- You bought a property with an annexe before 2018 and paid the higher rate of stamp duty.
- Your purchase was bought as a shared ownership property or as a first-time buyer on or after 22 November 2017.
- HMRC’s online stamp duty calculator made an error.
How does claiming back stamp duty work?
Claiming back stamp duty is a simple process of applying to HMRC online or by post. You can find all the details about how to reclaim stamp duty here.
What do I need to reclaim stamp duty?
To reclaim stamp duty through HMRC, you will need details of the purchased property – most importantly the effective date of purchase and the SDLT unique transaction reference number. You’ll also need the details of the previous main residence you’ve sold, including the effective date of sale, the address of the property and the name of the buyer.
Finally, you will need to know the amount of stamp duty you paid and how much you want refunded. HMRC will also need to know your bank details to pay your refund, if the application is successful.
How long do I have to make a stamp duty refund claim?
There are some deadlines to the stamp duty surcharge refund. If you sold your property after 29 October 2018, you have 12 months of the filling from the date you sold your home, to make your request for a refund. Alternatively, you have 12 months from the filing date of the new residence’s stamp duty, whichever comes first. If you sold your property before the 2018 filing date, there are other rules. You would need to make a claim within a year of the stamp duty being filed on the new purchase, within three months of the sale of your first property, or whichever is later.
How long does it take for HMRC to refund stamp duty?
HMRC usually processes and repays successful stamp duty refund applications within 15 days. Applications generally only take longer if HMRC needs more information before making a decision.
What is the penalty for late or incorrect payment of stamp duty?
There are fines and interest payments due on stamp duty if you meet the submission and payment deadlines. You must get your forms stamped by HMRC within 30 days of when they were signed and dated.
If you fail to submit your forms in time, you’re liable to pay a fine. The fine for documents that are late by up to 12 months is 10% of the tax due (up to a maximum fine of £300). If you’re between 12 and 24 months late with your submission, the fine is 20% of the tax due. If your submission is more than 24 months overdue, you’re eligible to pay a fine of 30% of the value of the tax. You’ll also be liable to pay interest on unpaid stamp duty charges, up to the day you pay the tax.
How can you avoid stamp duty?
If you’re looking to avoid paying stamp duty, you can try to haggle down the price of the purchase, or even consider building your own home rather than buying one.
Another way to avoid the higher rate of stamp duty is to transfer the ownership of your main residence to a family member. This will exempt you from paying the additional 3% stamp duty for buying a second home.
Are there any other ways to reduce stamp duty?
HMRC offers various types of relief and exemption for stamp duty. First-time buyers are exempt from paying stamp duty on the first £425,000 of their property purchase and only pay a further 5% on the remainder of any purchases up to £625,000. Any first-time buyers paying more than this for their property are eligible to pay the full rates.
Further exemptions and reliefs exist for various reasons, many of which aren’t particularly common. You can see a full list of the reasons for exemption or relief on the UK government website.
Is stamp duty set to increase?
The government announced a cut to stamp duty on 23 September 2022. The reduced rates of stamp duty are currently slated to be removed at the end of March 2025. As of November 2023, the government hasn’t released any further details about future rates, but the current assumption is that they will return to their previous levels.
What should I do if I’ve been approached about making a speculative stamp duty refund claim?
In May 2022, the UK government issued a warning to new homeowners about rogue tax repayment agents cold calling to persuade them to make speculative stamp duty refund claims. These claims could leave homeowners with large tax bills. If you’ve been approached about claiming a stamp duty refund and you’re unsure if you’re eligible for one, the government’s advice is to check with your original conveyancer first. There’s also a government helpline you can call for advice (0300 2003 510).
Need to know more about the legal side of buying and selling property? Our guides have got you covered. Learn about freeholds and leaseholds, offers and contracts, conveyancing, building surveys and more.
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