In the vast majority of cases, buyers have to pay stamp duty when they purchase a property. There are some exceptions to this rule and first-time buyers are entitled to some relief. However, for most people, stamp duty is an expected cost of acquiring new property.
But while you might have to pay some stamp duty, how much you have to pay is determined by several different factors. If you or anyone else involved in your property sale miscalculates, or you are charged stamp duty erroneously, you might be able to claim a refund.
Claiming Back Stamp Duty
Stamp duty applies to the vast majority of property purchases that take place in the UK. The precise rules and regulations are different between the constituent nations of the UK, but the Stamp Duty Land Tax (SDLT) that we refer to in this article is the kind used in England. The amount of stamp duty that you have to pay on a property purchase will vary according to several different factors. For example, first-time homebuyers don’t have to pay as much stamp duty as those who are already property owners. The value of the property at the centre of the transaction will also determine how much stamp duty is levied on the purchase.
The buyer is always the one that pays the stamp duty on property deals; sellers are not required to. However, given that the majority of people who are selling a home do so while also finding a new one to buy, stamp duty is something that everyone involved in the transaction should know about. If you think that you have paid too much stamp duty or you have paid it when you should have had an exemption, you can potentially claim some or all of your money back.
Reclaim Stamp Duty
Given that the guidelines surrounding stamp duty, who has to pay it, and how it is calculated, are all pretty much set in stone, you might wonder how it’s possible that anyone ever ends up overpaying their stamp duty. After all, most of us will proceed through the property acquisition process under the watchful eye of a solicitor who should know the rules.
But, as with anything else in life, mistakes can and do occur. People aren’t perfect and it is inevitable that there will be the occasional mix-up or misunderstanding that leads to stamp duty being overpaid. Fortunately, when this does occur, there are procedures in place to enable you to claim a stamp duty refund. If you have all the relevant paperwork to hand and you submit everything correctly, it doesn’t usually take more than 15 days for HMRC to process your refund application. If your claim isn’t processed within this time frame, then you might be able to claim interest on any refund payment that is ultimately made to you.
Can You Claim Stamp Duty Back?
If you have paid stamp duty when you shouldn’t have, or you have paid more than you think you ought to have, you can file a refund claim. If you are successful, then you will either be reimbursed for the overcharge or refunded for stamp duty that you should have been exempted from.
How To Claim Back Stamp Duty
You can make a claim for a stamp duty refund online or via post. In either case, the process is mercifully simple and usually resolves promptly. Obviously, if you choose to file your claim by post, then things will take a little longer. Some people find that hiring a solicitor to help them through the process makes things much simpler and makes them feel a lot more at ease in an unfamiliar world. There are some businesses that will assist you in your stamp duty refund claim on a ‘no win, no fees’ basis. This means that if you are unable to secure a refund, then you won’t need to pay for their services.
However, if you are going to hire someone to help you through the process, remember that that is another cost you will have to pay. For most people, that means that at least some of their refund money will have to go to legal costs.
Can You Claim Back Stamp Duty On Second Home?
Yes. There is a procedure in place specifically for enabling people who have had to pay the higher rate of stamp duty on a second home to claim back the extra spend. If you have purchased a new property to make your main home, but there was a period of overlap when you still owned your previous main home, you will have had to pay the higher rate of stamp duty as if you were purchasing a second home in addition to your main residence.
If the previous property was sold on or before the 28th October 2018, you will need to file your request for a refund with HMRC within three months of the sale being finalised, or within 12 months of filing your latest tax return.
If your previous property was sold after the 28th October 2018, you will instead have a period of 12 months from the sale of the property, or 12 months from the filing of your last tax return relating to the new property in which to make your claim. Whichever date comes later is the cut-off point.
Claim Back Stamp Duty On A Second Home
Anyone who is purchasing a property in addition to their main residence, a second home, needs to pay stamp duty. If you inherit property while you are in the process of finalising your very first property purchase, you will no longer be considered a first-time buyer, and you won’t be entitled to any of the tax breaks that first-time buyers can take advantage of. In particular, you will have to pay an a 3% surcharge for the purchase of a second home.
Many people who are purchasing a new home to make their primary residence are not able to treat it as their primary home until they have completed the sale of their previous property. In cases like this, there is no getting around the fact that you have to pay stamp duty on your property purchase as if you intended to keep your previous property.
Reclaiming Stamp Duty On Second Home
In scenarios like the one outlined above, HMRC is more understanding than you might think. As long as you sell your previous property, or give it away if you are so inclined, within three years of purchasing your new home, you can apply for a stamp duty refund. You must make the claim for a stamp duty refund within 3 months of finalising the sale of your previous property or within 12 months of filing your tax return. The later date is the one that is used as a cut off point.
As well as situations like the one outlined above, where your ownership of a new primary residence overlaps with that of the home you are trying to sell, there are other cases where stamp duty might be paid incorrectly. Human error is always a factor in these things and a simple miscalculation can lead to you receiving an incorrect bill or filing your paperwork incorrectly. If a future audit reveals that you have made an error in calculating your rate of stamp duty, you can claim a refund on this basis.
How To Reclaim Stamp Duty On A Second Home
If you believe that you are entitled to a refund on the stamp duty that you have paid for a second home, then it is always worth consulting with your solicitor. They will be able to tell you pretty quickly and definitively whether you can apply for a refund and how best to go about doing so.
Even if you meet the criteria for receiving a full stamp duty refund, if you don’t file the refund claim in the specified time period, then you will be completely out of luck. It doesn’t matter how valid your claim is if you don’t do it properly, it will automatically be rejected. However, it is worth noting that there are provisions in the law for exceptional circumstances. If there is a good reason that you weren’t able to file your claim in time, then you might still be able to claim your refund.
The vast majority of property purchases in England are subject to stamp duty. If you are buying a new property to enable you to move from your current dwellings, any overlap in your ownership of each property can lead to you being charged a higher rate of stamp duty. If you subsequently sell the initial property within three years of buying the new place, you can make a claim to have your stamp duty refunded. Hiring a solicitor to help you navigate the property buying process from the very beginning will reduce the chances of mishaps like these from occurring in the first place.