Here’s how to claim a refund if you have overpaid…

Thousands of homeowners have already claimed refunds worth millions. You might be one of them if you have unwittingly overpaid your stamp duty.

Stamp Duty Land Tax (SDLT) is a tax paid when you buy a property in England, Wales or Northern Ireland. In Scotland, there is a similar tax called the Land and Buildings Transaction Tax (LBTT). Most people use a solicitor or legal conveyor when buying a property. They may deal with issues of stamp duty on your behalf, but it is still your responsibility as the buyer to make sure that it is paid. If it is not paid within the correct timeframe, then you may be charged penalties and interest, as well as the original tax owing.

Stamp duty is paid in bands based on the purchase price of the property. You do not currently pay anything on purchases of £125,000 or less. You pay 2% between £125,001 and £250,000, 5% on figures between £250,001 and £925,000, 10% between £925,001 and £1.5m, and 12% for anything above £1.5m. As with other stepped systems, the totals payable from each band are cumulative.

The basic system seems reasonably straightforward, but SDLT has undergone numerous changes since its inception in 2003. It has experienced more changes than any other comparable tax, in fact. It was only in 2014 that the government announced that stamp duty would change from a slab system to an incremental system. More recently, in April 2016, a 3% surcharge was added for the purchase of second homes.

Partly as a result of these many changes, the legislation governing SDLT now contains a large number of exceptions, exemptions and reliefs covering the wide range of property types and their buyers.

The confusion surrounding SDLT has led to a large number of overpayments, and HMRC has now had to issue refunds on more than 10,000 transactions, with the average refund standing above £11,000. More than £120m has been refunded to second-homeowners alone since that surcharge was introduced.

One issue pertinent in this area is that people who buy a new home without selling their current one must pay the higher rates for purchasing a second home upfront. If they sell the first property within three years, however, then they are eligible for a refund.

According to experts, many professionals who advise homebuyers are simply not familiar with all the complexities in this area and may be inadvertently offering wrong advice and tax calculations.

In one case handled by a firm of property tax advice specialists, a sole flat buyer named his partner as a guarantor and borrower on the new mortgage. He was advised that because she already owned a property, he was liable to pay the 3% surcharge for buying a second home. He ended up paying £14,000 for stamp duty, but this figure was incorrect. He should actually have paid £5,000 – a huge difference of £9,000.

The reason is that being on the joint title or mortgage does not necessarily mean that you have an “interest” in the property.

How to check and reclaim any overpaid stamp duty

The first step is to find out how much SDLT you have actually paid. If you do not know the figure, then contact the solicitor who acted for you during the purchase.

HMRC says that returns can only usually be amended within 12 months of filing. The deadline for claiming back any tax you may have overpaid, however, is four years from the “effective date” of the transaction.

If you believe that you may be due a refund, then you will need to write to the Stamp Duty Land Tax Office.

You must tell them why you believe that you have overpaid, state which parts of SDLT you believe to be in error, and submit a revised calculation. You will need to confirm the amount of refund to be paid and who it should be paid to. You will also need to quote your Unique Transaction Reference Number (UTRN) and include a copy of the original SDLT return.

Alternatively, you can engage property tax specialists to evaluate your SDLT and pursue any refund claims on your behalf. This will generally work on a no-win, no-fee basis, but there will be a charge to pay if you receive a repayment from HMRC.