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Have you overpaid on your stamp duty bill?

15,700 buyers have claimed stamp duty refunds

Have you overpaid on your stamp duty bill?

Thousands of property buyers are incorrectly paying a 3% surcharge aimed at buy-to-let investors and holiday homes, according to a new analysis of official stamp duty data.

Official statistics show that 15,700 buyers have paid too much stamp duty since the surcharge was introduced. And analysis by the estate agency Jackson-Stops says this is partly due to buyers misunderstanding the complicated rules.

Here, we take a look at some of the more common reasons people overpay on stamp duty.


Reasons people overpay stamp duty

Under new stamp duty rules introduced in April 2016, buy-to-let investors and those buying second homes are obliged to pay an additional 3% surcharge on top of the standard rates.

But in some cases, the surcharge has been incorrectly applied, meaning some home buyers have been hit with a higher bill. To date, 15,700 buyers have claimed refunds from HMRC.

The rules around the tax are complicated. HMRC says it receives calls about the regulations on a daily basis and said in February that they keep all guidance ‘under constant review’.

In a larger number of cases, buyers overpay because they buy a new home before selling their first – so that they technically own two properties.

But Jackson-Stops have also outlined a number of other common issues, including:

  • Those buying more than one property in a transaction should pay the tax based on an individual average, rather than the collective sum. So if you were buying five £200,000 houses in the same transaction, they won’t be taxed as if they were one £1m property.
  • Mixed-use dwellings – properties that contain offices or land – are often subject to commercial rather than residential stamp duty rates. One buyer of a farmhouse with 50 acres of land found the difference in stamp duty rates was £186,750.
  • A buyer with an existing buy-to-let property who sells their main home to move abroad doesn’t need to pay the tax when buying a new main home when they return to the UK.

The good news for those who overpay is that they can claim a refund on these charges within three years.

Stamp duty: frequently asked questions

Aside from the issues raised by Jackson-Stops, here are five of the most common questions we’ve been asked about the stamp duty rules for investment properties and second homes:

Question Answer
What happens if I inherit a property? Stamp duty isn’t payable on inherited properties. But if you inherit a home, and then buy another one before selling it, you’ll usually need to pay the surcharge on the new property. If you inherit a share of 50% or less of a property and buy your next home more than 36 months later, it won’t be considered an extra property.
What if I want to buy a home that has a ‘granny flat’ or annex? If the annex is bought in the same transaction as the main residence, is within the same grounds and is worth no more than a third of the overall value of the property, you won’t have to pay the extra charge.
I’ve split up with my partner but my name is on the deeds. Will I need to pay the surcharge when I buy a new house? Yes, initially. When you buy your new home you’ll need to pay the extra 3%, but you can claim this back if you sell your stake in the old property within 36 months.
I’m helping my child buy a property and already own my own home. Will I need to pay the additional charge? If you’re gifting money or acting as a guarantor, you won’t need to pay. If, however, your name is going to be on the mortgage and you already own your own home, you’ll need to pay the surcharge.
I own a UK property and want to buy a holiday home abroad. Will I have to pay the surcharge?  No. Stamp duty only applies to properties in the UK.
  • To find out whether the surcharge will apply to you, check out our full guide on buy-to-let stamp duty.

Buy-to-let stamp duty rules: a background

In April 2016, the government brought in new rules to add an extra 3% surcharge on top of existing stamp duty rates for people buying investment properties or second homes that cost more than £40,000.

This means the stamp duty bands for these buyers are as follows:

Portion of property price Stamp duty rate
If the property is worth less than £40,000 0%
£0-£125,000 3%
£125,001-£250,000 5%
£250,001-£925,000 8%
£925,001-£1.5m 13%
£1.5m+ 15%

Buy-to-let stamp duty calculator

If you do need to pay the additional rate of stamp duty, you can find out how much you’ll need to pay in total by using the stamp duty calculator below.

Otherwise, if you’re buying a home to live in, you can use our stamp duty calculator for home buyers.

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