Stamp duty is a tax that you must pay when purchasing land or property in the United Kingdom for a specific amount. However, if you sell your primary house within three years of completing a new home. Such may be eligible for claiming back some or all of the stamp duty you paid. Want a stamp duty surcharge? You will find everything you need to know about claiming back a stamp duty for both your main and second homes in this article. Have fun reading.
What Is Stamp Duty?
The stamp duty land tax (SDLT) is a tax levied by the United Kingdom government on the purchase of land and properties worth more than a specific amount. When you buy a home in England, you must pay Stamp Duty Land Tax. However, the amount you pay will be determined by the property’s valuation, whether you are a first-time buyer or already own property. Likewise, this tax must be paid to Her Majesty’s Revenue and Customs (HMRC) within 14 days of the completion of a property purchase or transfer in England and Northern Ireland.Â
On the other hand, the rate of stamp duty you are to pay will determine whether you intend to use the land or property for residential, non-residential, or mixed uses. Nevertheless, you may qualify for a refund if you purchase your new primary residence on or after January 1, 2017. Likewise, if a buyer sells their primary house within three years of completing a new home, they may be eligible for a stamp duty refund.
In addition, stamp duty rates go up as the property price increases. The charges you pay will be calculated according to the proportion of the property price that falls into each band.
Rates and Bands for Main Residences
The below table shows stamp duty bands and rates for main residences
| Property Value | SDLT Rates |
| Up to and £125,000 | 0% |
| From £125,001 to £250,000 | 2% |
| From £250,001 to £925,000 | 5% |
| From £925,000 to £1,500,000 | 10% |
| £1,500,001 or over | 12% |
Generally, if you’re a first-time buyer, you can get a stamp duty tax reduction if you buy a home for less than £500,000. While there will be no stamp duty to pay on the first £300,000. Nevertheless, you must pay a 5% tax on the value of the property between £300,001 and £500,000. Likewise, tax assistance is not available to first-time purchasers who spend more than £500,000 on a home.
How to Apply For a Refund
You do not need to hire a lawyer or an accountant when claiming back stamp duty. You can apply online or by filling out the form on-screen, printing it, and mailing it to HMRC.
You’ll need a Government Gateway user ID and password to apply online, which you may generate when you first use the program.
HMRC aims to process the payback within 15 working days of receiving all of the necessary paperwork. In other cases, HMRC’s guidance advises that you should claim stamp duty by writing to the Stamp Duty Land Tax Office and including:
- Your name and address
- Details of the property that attracted the higher rates of SDLT:
Date of purchase
SDLT unique transaction reference number
- Details of the home you’ve sold:
Date of sale
Address of the property
Name of the buyer
- Amount of tax paid on the property attracting the higher rates of SDLT
- The amount of tax you’re asking repayment for
- Bank account and sort code details of the person who is to receive the payment
- the UTR Number
- copy of the original SDLT return
- the parts of the SDLT return that are wrong.
Claiming Back Stamp Duty on Second Home
Generally, you must pay additional stamp duty if you are purchasing a second property. Or if you are purchasing a home and may wind up owning two homes, even if just temporarily. Anyone purchasing a second residential property valued at more than £40,000 would normally be subject to additional stamp duty. This is true whether you’re buying a second house as an investment, a vacation property, or for any other reason.
In addition, even if you already own a property abroad, you must pay a higher rate. It also applies if you only own a portion of a building.
What Is the Stamp Duty Surcharge?
If you acquire a second home, maybe, a rental property, a holiday home, or an additional residence, you must pay an extra 3% charge on top of the below-outlined standard stamp duty rates.
| Property Value | SDLT Rates |
| Up to and including £125,000 | 3% |
| From £125,001 to £250,000 | 5% |
| From £250,001 to £925,000 | 8% |
| From £925,000 to £1,500,000 | 13% |
| £1,500,001 or over | 15% |
Who Does the 3% Sdlt Surcharge Apply?
For persons buying a second or additional residential property, as well as organizations and other non-natural people? You should know that buying a first or additional residential property is subject to the Stamp Duty land tax surcharge. The criteria are quite intricate for what appears to be a straightforward goal of imposing a stamp duty surcharge on second residences and residential property purchased for investment purposes
However, if one of the houses is worth at least two-thirds of the total value, the “subsidiary dwelling” can be ignored for the 3% surcharge. You can also use the Multiple Dwellings Relief, or MDR, to decrease the stamp duty you owe on that property. Note that if you pay the 3% extra on the acquisition of your replacement main house before selling your old primary residence and then selling it within three years, you may be eligible for a Stamp Duty surcharge.
If you buy your new home before selling your old one, you’ll have to pay a premium. However, you may be eligible for reimbursement if you sell your former primary residence.
Nonetheless, if you don’t pay your stamp duty within 14 days of closing your house transaction, you’ll be fined.
What Are the Chances That I Will Be Eligible to Claim Back a Stamp Duty?
If you sell your primary residence within three years of purchasing your second home and it becomes your primary residence, you may be eligible for a stamp duty surcharge on the second home fee.
There are potential reasons why this might happen, though. They include:
- You may decide to buy your new house before selling your old one if you are having trouble selling your current one or if there is a drop in sales.
- Maybe you have purchased a rental property or a vacation home but then chose to sell your primary residence and return to it.
- You might be buying as a couple, but it happens that one of you owns another home that you don’t want to sell.
- While you’re negotiating a divorce, you can end up with two homes.
- What is the procedure for obtaining a stamp duty refund?
- You can get a refund by filling out an online form on the UK government’s website.
However, to file a claim, you’ll probably need the following items:
- information about the property that was subject to the higher stamp duty rates. This includes the acquisition date as well as the unique transaction reference number.
- details of your former principal residence, with the date of sale and also the buyer’s name
- details of your former principal residence, with the date of sale and also the buyer’s name
- the amount of tax you paid earlier, which is now subject to higher stamp duty rates.Â
- The amount of tax you want to claim back
- Â The bank Information about the payment receiver, such as bank account and sort code
How Long Does It Take To Receive a Claim Back for Stamp Duty?
Your claim should be processed within 15 days after you complete the HMRC online form.
Deadline for SDLT claim back?
The general rule is that you cannot file a stamp duty claim 12 months after the initial SDLT return was filed. On the other hand, it may be 14 days after completing the original purchase. Nevertheless, in some exceptional circumstances, a Stamp Duty refund claim can be submitted to HMRC up to four years after the initial transaction.
However, you have 12 months from the time of the sale of your previous major property to receive a refund of the 3% surcharge. But that’s if you sell it within three years of purchasing your new main residence.
Furthermore, in a place where the period for claiming a refund from HMRC has elapsed, you may still have grounds to sue your professional adviser and their insurers if they are the ones that misled you into overpaying Stamp Duty. Normally, you have six years from the day you paid Stamp Duty to file a claim or three years from the date you learned you had overpaid if the period is longer.
How Long Does a Stamp Duty Refund Take?
Normally, HMRC will issue the return within a month or two. However, they may suspend any reimbursement while they investigate the claim. This is to see if it involves a notorious claims firm with a history of filing fraudulent claims.
Even if HMRC pays the reimbursement quickly, they will always launch an investigation into the return application. This is to ensure that the facts fit the requirements for the relief sought. If, however, they determine that the refund should not have been made. Maybe, as a result of their investigation, they will send a closure notice requesting restitution of the tax you claim. Nevertheless, this decision can be challenged by the tax tribunal if necessary.
Does the Stamp Duty Apply to Leasehold Extensions?
Yes, it’s possible. Lease extensions, just like any other property acquisition, are subject to stamp duty. However, because the typical stamp duty threshold is £125,000, most people are exempt from paying it.
Even so, the problem with the second-home stamp duty rate is that it begins at a significantly lower £40,000. Therefore, if you pay more for the extension and have other properties, you’ll have to pay the higher stamp duty rate. However, if the lease extension is for your primary residence, there might be an exclusion.
Conclusion
The stamp duty land tax (SDLT) is a must for you to pay on the purchase of land and properties worth more than a specific amount as levied by the United Kingdom government. However, you can also claim back some or most of the stamp duty you paid if you purchase your new primary residence on or after January 1, 2017, or if you sell your primary house within three years of completing a new one.
Claiming Back Stamp Duty FAQs
Can stamp duty be added to mortgage?
It is possible to add Stamp Duty to your mortgage, but it’s important to note that this will incur interest over the duration of the mortgage term, and will also affect your loan-to-value ratio (LTV).
At what point does stamp duty have to be paid?
So, at what point in your property purchase do you actually need to pay the stamp duty tax? Unlike the vast majority of fees associated with buying a house, the payment of stamp duty takes place after the sale is completed
How can I avoid paying stamp duty?
Six ways to legitimately avoid stamp Duty
- Haggle on the property price. The amount you are charged in stamp duty depends on a number of factors, including: …
- Transfer a property. …
- Buy out your ex. …
- Claim back stamp duty. …
- Pay for fixtures and fittings separately. …
- Build your own
How do I avoid stamp duty on a second property UK?
Ways to avoid stamp duty on your second home
- Buy a caravan, motorhome, or houseboat. …
- If the property is intended to be used by a family member, put the deed and mortgage in their name. …
- Purchase property worth less than £40,000. …
- Purchase a buy-to-let as a first-time buyer.
