£10m a month handed out in stamp duty refunds
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
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.
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 – 3% 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.
Click here to access stamp duty calculator.
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