HMRC is refunding around £10m a month to home buyers who have fallen foul of the government’s buy-to-let stamp duty surcharge.
A 3% surcharge for investors and people buying second homes brought total stamp duty receipts to a record £2.6bn in the last quarter – but it’s also affected many normal home movers.
In total, around £185m has been refunded to 15,000 buyers since the introduction of the new rules in April last year.
Here, we take a look at how buyers are being affected by the tax, and explain how you can work out how much stamp duty you’ll need to pay.
- If you’re just starting the process of buying a home, you can get impartial, expert advice on finding the right mortgage by calling Which? Mortgage Advisers on 0808 252 7987.
Home movers face initial surcharge
Under the current system, anyone who buys an additional home – either as an investment property or holiday home – needs to pay a surcharge of 3% on top of normal stamp duty rates.
While the rules aren’t targeted at people who are simply selling their current house (or ‘primary residence’) and buying a new one, many home movers are being caught up in the system.
When people complete on their new home before selling their existing one, they are technically ‘buying a second home’ – movers in this situation will need to pay the surcharge up front and then claim it back.
Buyers can get their money back within three years, but the lack of a grace period between buying and selling properties means some movers are shelling out thousands more up-front than they might have expected.
- To learn more about whether you’ll need to pay the stamp duty surcharge, check out the Q&A in our full guide on buy-to-let stamp duty
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Stamp duty surcharge: how it works
The additional rates apply to anyone buying a property over £40,000, and can add a significant amount on to your bill.
The table below shows how the system works for standard buyers (meaning those buying a primary residence) and those who need to pay the additional rate.
| Portion of property price | Standard rate | Buy-to-let rate |
| £0-£40,000 | 0% | 0% |
| £0-£125,000 | 0% | 3% |
| £125,001-£250,000 | 2% | 5% |
| £250,001-£925,000 | 5% | 8% |
| £925,001-£1.5m | 10% | 13% |
| £1.5m+ | 12% | 15% |
For example, take a £250,000 property:
Standard rate of stamp duty
- Portion 1: £0-£125,000 – 0% tax
- Portion 2: £125,001-£250,000 – 2% tax = £2,500.
- Total: £2,500
Additional rate of stamp duty
- Portion 1: £0-£125,000 – 3% tax = £3,750
- Portion 2: £125,001-£250,000 – 5% tax = £6,250
- Total: £10,000
Buy-to-let stamp duty calculator
If you need to pay stamp duty at the higher rate, you can find out how much your total bill will be using our buy-to-let stamp duty calculator.
If you’re buying a property that isn’t eligible for the additional rate of stamp duty, you can use our standard stamp duty calculator.
Exchanging contracts
You can avoid paying a stamp duty surcharge by completing on both of your properties at the same time – although this isn’t always possible.
Indeed, a recent report found that four in ten buyers and sellers face delays at this step of moving home.
The government is currently consulting on ways it can speed up the home moving process in the future.
Proposed stamp duty reforms
The latest figures show that stamp duty receipts are up 23% in a year – but some have argued that the tax is dampening down the housing market.
With that in mind, some MPs have proposed sweeping reforms to the system, with speculation heating up ahead of the Autumn Statement.
In the last few months alone, proposals to cut stamp duty for first-time buyers and downsizers, to offer tax breaks for energy efficient homes, or to pass the tax onto sellers have all been voiced.
Despite the rumours, however, there’s been no clear indication the government is seriously considering an overhaul in this month’s Budget speech.
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