Stamp duty refund: How it works and how to claim

Unless you’re buying a property under £125,000, 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 ways to claim a stamp duty refund – and we’ll show you how.

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 £125,000 – 0%£125,001-£250,000 – 2%£250,001-£925,000 – 5%£925,001-£1.5 million – 10%Over £1.5 million – 12%

Note: Currently there is a stamp duty holiday in effect. The UK Government has suspended all stamp duty payments on purchases up to £500,000 until 30 June 2021.

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 companyBuying 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 November 22nd 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 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?

The initial penalty for late or incorrect payment of stamp duty is £100. If you don’t pay the correct amount within six months of the initial penalty date, HMRC will charge you another £300 or 5% of the undeclared tax, whichever is greater. Waiting another six months without paying will see you being charged the same amount again.

These penalties are cumulative. So, if you wait for 12 months after the initial penalty date, you will be liable to pay £100 plus £600, or 10% of the undeclared tax.

How can you avoid Stamp Duty?

You can avoid paying stamp duty by taking advantage of the stamp duty holiday and purchasing before 30 June 2021. Otherwise, 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.

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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