How to reclaim stamp duty overpayments

When you’re buying a new home, paying stamp duty is unavoidable. Stamp duty land tax (SDLT) is a tax that needs to be paid on all purchases of property, including land. For residential property, stamp duty is applicable on properties over £40,000 and for non-commercial property such as shops and offices or mixed land such as forests and farmland, stamp duty is applicable from £150,000 upwards. However, when buying a home, many will face the stamp duty surcharge. This is an additional higher rate of stamp duty for when you purchase a home you do not intend to live in, for example a buy-to-let, or if you buy an additional home to your main residence such as a holiday home. In some cases you may be able to reclaim stamp duty overpayments if you have suffered the surcharge rates.

What are the stamp duty rates?

There are different stamp duty rates depending on your status when you are purchasing. First-time buyers are eligible for tax relief. To qualify as a first-time buyer, you must not have owned any residential property either in the UK or abroad before. This would include owning property which has been gifted to you or property you have inherited. First-time buyers are able to use the following stamp duty rates:

• No stamp duty charge on properties up to £300,000
• 5% stamp duty charge on properties between £300,001 to £500,000
• Standard stamp duty rates and disqualified from first-time buyer tax relief on property over £500,000

The standard stamp duty rates are for anyone who has previously owned property. It will largely apply to you if you are looking to move homes. If you are completing between 1 July 2021 and 30 September 2021, you will be charged the following standard stamp duty rates:

• No stamp duty charge on properties up to £250,000
• 5% stamp duty charge on properties between £250,001 to £925,000
• 10% stamp duty charge on properties between £925,001 to £1.5 million
• 12% stamp duty charge on properties over £1.5 million

The standard stamp duty rates are due to change from 1 October 2021:

• No stamp duty charge on properties up to £125,000
• 2% stamp duty charge on properties between £125,001 to £250,000
• 5% stamp duty charge on properties between £250,001 to £925,000
• 10% stamp duty charge on properties between £925,001 to £1.5 million
• 12% stamp duty charge on properties over £1.5 million

What are the stamp duty surcharge rates?

The stamp duty surcharge rates will apply as soon as you own more than one residential property. This often catches out many homebuyers as getting timings aligned between buying a house and selling a house can be difficult. If you find that you have not yet sold your old house by the time you complete on the purchase of your new house, then you will be subject to the stamp duty surcharge. The surcharge is an additional 3% on top of the standard rates and is explained in more detail in our article on stamp duty on second homes and buy-to-lets.

When must the stamp duty surcharge be paid by?

All stamp duty, regardless of which rate you are subject to, must be paid within 14 days of the completed purchase. Usually, if you are using a solicitor to help you, they will calculate how much stamp duty is due based on the value of the property you are buying and collect this from you in advance. They will then pay HMRC on your behalf on the same day as completion.

If you are filing your own stamp duty land tax return, you can do this online. Alternatively, you may want to seek out an accountant to help you complete the form and ensure you have calculated the correct amount of stamp duty due.

How to reclaim stamp duty overpayments if I buy a new house before I sell my old one

If you do find yourself in the situation where you have had to pay the stamp duty surcharge because you were buying a new house to move into before your old house sold, you’ll be able to claim back the surcharge amount. To request the refund, you can either apply online or complete the form to post back to HMRC.

Make sure you have the following information to hand to be able to fully complete the form:

• Details of the property that attracted the surcharge stamp duty rate including the date of purchase and the unique transaction reference number (UTRN)
• Details of your previous main residence which has now been sold including the date of sale and the address of the property
• The name of the buyer of your previous main residence
• The amount of tax paid on the property that attracted surcharge stamp duty
• The amount of tax you are requesting as a refund
• The bank account and sort code of the person who will receive the repayment of the surcharge stamp duty so that it can be paid by HMRC electronically as opposed to by cheque (if the repayment is going to an agent rather than you as the purchaser then you will need to provide a covering letter signed by you as authorisation)

When do you need to claim stamp duty refund by?

You need to be aware of two deadlines if you are looking to make a claim for refund on overpayment of stamp duty. The first deadline is the timeframe in which you have to dispose of your main residence. If you have overpaid stamp duty because you were unable to sell your house before purchasing your new house, you have 3 years from the purchase date of the new house to sell the old house. Alternatively, you can also dispose of your old main residence by gift, such as if you choose to give it to your children or grandchildren (note that there will be no capital gains tax when gifting your main residence).

Once you have disposed of your main residence within this timeframe, you must then complete the application for refund within 3 months of the sale or disposal of the old main residence, or within 12 months of the filing date for your SDLT tax return (which comes later).

How long does it take to receive a stamp duty refund?

Generally, HMRC are able to process your refund request within 15 working days. They can at times extend this during busy periods. If the delay is unreasonable, you may be entitled to interest on the amount due to you, however you will not be offered any compensation.