If you are considering buying property in the UK, you will likely be expected to pay SDLT (Stamp Duty Land Tax). For many, this is one of the more significant costs incurred when moving into a new home. It is often something that often dissuades people from buying a new property. However, it is important to note that buyers can receive stamp duty refunds in specific circumstances.
In this article, we’ll talk you through the process of how to claim back stamp duty, alongside providing you with more insight into Stamp Duty as a whole. Read on to see if you’re eligible for a stamp duty refund, and what to do to claim yours.
Stamp Duty is a tax that buyers must pay when purchasing property or land in England or Northern Ireland, provided that the purchase price is more than £250,000, though certain exemptions apply. For example, stamp text only applies to properties priced at £425,000 or above for first-time buyers, who can also access specific discounts.
Applying for a Stamp Duty refund can lessen the financial burden associated with moving house or getting on the property ladder. As a result, it is important that those who are eligible for these refunds seek them out.
You may be eligible for a refund if:
• You purchased a second property but then sold your main property within three years.
• Your property has an annexe.
• You purchased your property through a shared ownership scheme as a first-time buyer,
• You paid Stamp Duty on a property that is deemed “uninhabitable.”
• The initial cost of Stamp Duty was miscalculated, resulting in an overpayment.
To apply for a Stamp Duty refund, you must:
• Determine your eligibility
• Gather the necessary documentation
• Submit your refund claim within a specific time frame
Gathering Necessary Documentation
There are numerous documents that must be submitted in order for you to receive the appropriate Stamp Duty Refund.
For example, if you are applying for a Stamp Duty Refund on a second home but have sold your main residence, you will need the relevant documentation, such as your Land Transaction Return, contracts or sales paperwork, to back up this claim. Alternatively, you may have to find paperwork that proves that you are a first-time buyer or that the dwelling is considered uninhabitable.
You can apply for a Stamp Duty refund online through the UK Gov website (Government Gateway) If you would prefer to fill this form out by hand, as opposed to digitally, it can be printed out and posted at your convenience.
If you are using the system for the first time, you will be asked to make an account. Otherwise, you can access the relevant documents by providing them with your Government Gateway ID and password.
You will then be asked to provide a range of information so that your claim can be properly addressed. This includes basic identification information, such as your full name, address and banking details, alongside more tax-specific information, such as:
• Property/Property Sales information (Cost of SDLT, evidence of sale, etc.)
• Proof of eligibility for a refund & the amount you would like to be refunded
• The amount of SDLT tax paid and your SDLT unique transaction reference number.
Your SDLT unique reference number is an 11-character code found on your paper or electronic SDLT5 certificates.
Tips for a Smooth Refund Process
• Gather all of the relevant documentation ahead of time. Gathering all of the documentation ahead of time will ensure that you have everything you need to hand in when claiming back stamp duty. This increases your chances of making a successful claim.
• Apply within the appropriate time frame. While different deadlines can apply depending on your specific circumstances, you should apply for the refund within 12 months from the date you sold your previous property.
• Carefully review the paperwork before submitting it. You should ensure that you carefully review any and all paperwork before submitting your claim. Small mistakes or miscalculations could mean that you are not able to claim as much as you deserve.
The amount you will be expected to pay in Stamp Duty can vary depending upon a variety of factors, including:
• The price/value of the property you are purchasing
• Your buyer status (i.e., first-time buyer)
• The type of property you are buying
Below is an example provided by UK.Gov relating to the standard SDLT rates.
Generally speaking, surcharges are applied when individuals are purchasing a second residential property or are purchasing a buy-to-let property as a private landlord.
When purchasing a second property (typically an additional dwelling), a surcharge of 3% of the standard Stamp Duty charge will apply. Non-resident buyers will also face an additional surcharge of 2%.
When applying for a Stamp Duty refund, you will be able to receive any of the surcharge costs paid. As a result, this is typically between 2-3% of the price of the overall Stamp Duty.
There are many scenarios that could mean you are eligible for a stamp duty refund.
A 3% surcharge is automatically applied when property owners buy a second property. You can claim this back if you sell your first home within three years of the purchase date.
Properties with annexes are sometimes charged a higher Stamp Duty than those without. However, this could mean that you are able to apply for a multiple dwellings relief, which is typically set at around 3%.
First-time buyers are able to receive a significant discount on Stamp Duty and, in some cases, may not have to pay this at all (depending upon the price of the property in question). Those who purchase through shared ownership schemes may also be able to claim back some of the money spent on Stamp Duty, though this varies depending on which scheme you are involved in.
When a building is deemed uninhabitable, you may also be able to claim a Stamp Duty refund, as this is typically only applied to “dwellings.” However, appropriate evidence, such as a surveyor's report, must be provided.
If the initial cost of your SDLT was miscalculated, you can also apply for a refund to rectify this, therefore reducing the amount spent over all.
Reasons for Claiming Back Stamp Duty
There are many reasons why you may claim back stamp duty.
If you have overpaid due to an incorrect tax band calculation (i.e., the value of the property is not properly reflected in the SDLT charged), then you should apply for a refund to rectify this.
Many of the reasons outlined above shed light on circumstances in which stamp duty relief can be applied, especially when it comes to first-time buyers stepping onto the property market for the first time.
Exceptions and Special Cases
Typical exemptions relating to Stamp Duty payments include:
• Cases when a property is left to an individual in a will (Inheritance)
• Property ownership is transferred due to a divorce or the dissolution of a civil partnership
• Purchasing a freehold property for less than £40,000.
Providing all of the paperwork is filed correctly; a Stamp Duty refund is typically processed within 15 days by HMRC.
Yes, you may be eligible for a Stamp Duty refund if the property purchase falls through, provided certain conditions are met. For example, if the sale contract has a 'cooling-off' period and the contract is terminated within that period, or if the seller pulls out of the sale, you may be entitled to claim back the Stamp Duty you've paid. However, it's essential to check the specific circumstances and consult with a legal or tax advisor for guidance.
Yes, there is a time limit for claiming back Stamp Duty after the purchase. Generally, you must claim the refund within 12 months from the filing date of the Stamp Duty return, or within 12 months from the date of the purchase completion, whichever is later. It's crucial to submit the refund claim within this timeframe to avoid any potential penalties or complications.
Yes, if you believe you've overpaid Stamp Duty due to an error, you can apply for a refund of the overpaid amount. This could happen if, for example, you were eligible for a Stamp Duty relief or exemption that was not applied correctly at the time of purchase. To claim the refund, you'll need to provide evidence of the error and supporting documentation to the relevant tax authority.
If your Stamp Duty refund claim is rejected, you should review the reasons for the rejection provided by the tax authority. It's essential to understand why your claim was not successful.
You may need to rectify any errors or provide additional information or evidence to support your claim. If you believe the rejection is unjustified, you have the right to appeal the decision. Consider seeking advice from a legal or tax professional to assist you with the appeal process.
Generally, Stamp Duty is payable on the purchase price of the property and not on additional costs such as renovations or legal fees. However, there are certain circumstances where you may be eligible for relief or exemption from Stamp Duty on specific costs related to the property purchase.
It's advisable to consult with a legal expert to determine if you qualify for any Stamp Duty relief or refund on additional costs incurred.
Claiming a Stamp Duty refund may have tax implications depending on your individual circumstances and the amount refunded. For example, if you've already claimed tax relief on the Stamp Duty paid and subsequently receive a refund, you may need to adjust your tax returns accordingly.
It's essential to understand the potential tax implications and consult with a tax advisor to ensure compliance with tax regulations.
The method of payment for Stamp Duty, whether it's paid by bank transfer, cheque, or other means, typically does not affect the refund process. However, you'll need to provide proof of payment, such as a receipt or bank statement, when claiming the refund.
The refund will generally be issued using the same payment method used for the initial payment of Stamp Duty. If there are any changes in payment details, you may need to update the tax authority accordingly.
Many people fail to apply for a stamp duty refund as they simply do not realise they are eligible for this kind of financial support.
Poor record keeping could stand in your way of claiming back Stamp Duty, as you’ll need to provide HMRC with sufficient evidence to back up your claim.
As mentioned above, you typically have to claim back Stamp Duty within 12 months. However, certain exemptions apply, depending on individual circumstances.
If you are set to apply for a Stamp Duty refund, it's important to note that there’s plenty of information online that you can utilise to improve your chances of succeeding. For example, government websites and online portals provide you with detailed breakdowns of the refund process. Alternatively, you can seek out support through online communities.
However, if you still find the process confusing or have limited time on your hands, you may benefit from speaking to a member of our conveyancing team. One of our conveyancing specialists will be able to guide you throughout the process, ensuring that your best interests are protected and that you apply for the refund you deserve.
