If you have purchased a property you could have been one of the thousands to have been charged the wrong rate for Stamp Duty.
Not only that but dozens of renovators who have purchased a second property to do up while continuing to live in their old home may also find they can claim back thousands of pounds.
We reveal when you might be legible for reclaiming Stamp Duty, what the circumstances are and how best to go about reclaiming money you could be rightfully owed.
What is Stamp Duty?
When acquiring a property, including a second property, the payment of Stamp Duty Land Tax (SDLT) becomes mandatory. This tax is applicable in England and Northern Ireland and is triggered when the property's price surpasses a specific threshold.
For property purchases up to £250,000 (or £425,000 for first-time buyers), no stamp duty is required. However, if the price of the primary residence falls between £250,001 and £925,000, a 5% tax is applied on the amount exceeding £250,000. The next bracket is 10% for any portion between £925,001 and £1.5 million, and 12% on any amount exceeding £1.5 million. To obtain a more precise estimate of the stamp duty you might have to pay on a property, take a look at the stamp duty calculator on the gov.uk.
If you are purchasing an additional property while still owning your main home, an additional 3% tax is added to your stamp duty. However, you may be eligible for a rebate if you sell your main home within 36 months. Non-UK residents are subject to an extra 2% charge.
It's crucial to bear in mind that Scotland (LBTT) and Wales (LTT) have their own distinct rates for similar taxes, and these should be reviewed separately if applicable.
Why might I have overpaid Stamp Duty?
There are multiple areas where homeowners could have been charged incorrectly for SDLT and where you can claim money back.
Some individuals may have been wrongly advised to pay stamp duty, potentially leading to compensation claims for up to £80,000 each, affecting approximately 75,000 people, according to Cornerstone Tax 2020.
Cornerstone Tax 2020 claims £30 million has been repaid to homeowners in the last three years from Stamp Duty rebate and they reveal the most common areas people are incorrectly overcharged for SDLT are:
1. Multiple Dwellings Relief applies to those who have purchased multiple dwellings, such as freehold or leasehold interests in more than one property. There are currently 24.2 million households with registered multiple dwellings on their properties according to the English Housing Survey, and data shows a significant number of homeowners may have overpaid on stamp duty due to errors in the classification of their dwellings, resulting in an average loss of £34,987.72 in potential savings.
2. Uninhabitable Status where buyers of abandoned or uninhabitable properties may be eligible for a lower rate of SDLT or a tax refund. HMRC evaluates SDLT based on the condition of the property. However, for owners of uninhabitable homes, HMRC may challenge the property's status and deny an SDLT exemption. It is crucial to have the property assessed by a specialist to ensure the correct amount of SDLT is paid.
3. Pension payments whereby homeowners nearing retirement sell their homes and invest the profits in their pension funds, utilising schemes like Self-Investment Personal Pension (SIPP). Transferring a commercial property into a SIPP or SSAS pension can result in a 100% discount on the stamp duty. Errors related to pensions have emerged, where businesses sell their premises to their pension fund as part of retirement planning.
How to claim a Stamp Duty rebate?
If you believe you may be entitled to a SDLT rebate then you can apply for a repayment of the higher rates of Stamp Duty Land Tax through the gov.uk website. Alternatively, you can print off the online form and post it to HMRC.
If you're worrying about overpaying or your rebate request is rejected you can seek professional tax advice.
The data from the tax advisers also revealed that millions have never considered they may have been overcharged, even though with claimants could potentially see an average return of £27,000 per property in rebate from HMRC.
Cornerstone Tax 2020 stated: “By conducting a thorough analysis, seeking professional advice, and understanding the applicable regulations, you can minimise the risk of overpaying SDLT.
"However, if an overpayment does occur, initiating a review promptly allows you to rectify the situation, gather evidence, and pursue appropriate actions to claim a refund or make adjustments as required.”
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News Editor Joseph has previously written for Today’s Media and Chambers & Partners, focusing on news for conveyancers and industry professionals. Joseph has just started his own self build project, building his own home on his family’s farm with planning permission for a timber frame, three-bedroom house in a one-acre field. The foundation work has already begun and he hopes to have the home built in the next year. Prior to this he renovated his family's home as well as doing several DIY projects, including installing a shower, building sheds, and livestock fences and shelters for the farm’s animals. Outside of homebuilding, Joseph loves rugby and has written for Rugby World, the world’s largest rugby magazine.