When the time comes to purchase a property, you may be wondering: ‘How much will it cost?’. After all, the expense of buying a house isn’t just the property price, but in paying for taxation, solicitor’s fees, and more.
So, what difference does stamp duty make on the cost of buying a house? And perhaps more importantly – is it possible to get a stamp duty refund?
In the blog below, we have outlined what a stamp duty refund is, and how you can get one.
What is Stamp Duty?
When you purchase property or land in the United Kingdom, you are required to pay Stamp Duty. This tax typically only applies if the property you are purchasing is over a certain price.
The equivalent of stamp duty in Scotland is Land and Buildings Tax. In Wales, it is referred to as the Land Transaction Tax.
There are many different factors which determine whether a property purchase will involve stamp duty. It does not make a difference if the purchase is for a mortgaged property or a cash purchase – the tax will still apply to purchases over a certain amount.
How do you pay stamp duty?
The process of paying stamp duty is a service typically provided by your conveyancer/solicitor. In most cases, they will pay the tax on your behalf and then add the amount to their fees.
To make sure the stamp duty is paid, it is always worth following up with your conveyancer/solicitor on this.
Why do first time buyers have stamp duty discounts?
The UK government has recently faced increasing pressure to make it easier for first time buyers to get onto the property ladder. In response to this, a stamp duty land tax discount was introduced in 2017, to make it easier for first time buyers to purchase a house.
Can Stamp Duty be refunded?
Yes, you can get a refund on Stamp Duty if you are eligible to do so.
You are eligible to claim a refund on Stamp Duty if you sell your main residence within three years of completing on a new home.
You may also be eligible for a Stamp Duty refund if you paid a surcharge on a property with an annexe, granny flat, or another similar, smaller building on the grounds of your main home. This is because properties which have a ‘self-contained annexe’ are now regarded as a single home, rather than different houses. This is a recent rule change, so if you purchased the property after the rule changes, you could possibly qualify for a refund.
Finally, you may qualify for a stamp duty refund if you have paid more stamp duty than you should have. On occasion, HMRC’s stamp duty calculator makes a mistake, and you are entitled to a refund on any overpayments.
How Can You Get a Stamp Duty Refund?
To get a Stamp Duty refund, you are required to complete an SDLT return and send it to HMRC. This can be sent either by post, or online. Some people choose to hire a solicitor/conveyancer who will complete the return on their behalf – but although this can provide you with support, it is typically more expensive than doing it yourself.
To make the application for a Stamp Duty refund, you will need a Government Gateway user ID and password, which you can create when you use the service. HMRC then aims to process the repayment within 15 working days, after you provide them with all the information they require. This info will generally include:
- Name and address
- Details of the property
- SDLT unique transaction reference number
- Details of the home you’ve sold
- Amount of tax paid on the property that attracted the higher rates of SDLT
- How much tax you’re asking for a repayment of
- Bank account and sort code details of the person to receive the payment
If you decide to apply for a stamp duty refund, then it is worth applying for this sooner rather than later. If you sold your property on or after October 29, 2018, you have 12 months of the filing from the date you sold your London home to make your request to the taxman.
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