If you’re a homeowner in the UK, you may have overpaid on your stamp duty without even realising it. According to a recent poll commissioned by Cornerstone Tax, a leading tax advisory firm, a whopping 61% of homeowners have never considered the possibility of errors in the stamp duty they have paid. But fear not, as Cornerstone Tax has helped its clients reclaim a staggering £30 million in stamp duty fees over the past three years by avoiding or rectifying overpayments.
Understanding Stamp Duty
Before we delve into the reliefs and potential overpayments, let’s first understand what stamp duty is. Stamp duty, also known as Stamp Duty Land Tax (SDLT), is a tax levied on property transactions in England and Northern Ireland. The amount you pay depends on the value of the property and whether you are a first-time buyer, a homeowner, or a foreign purchaser.
The current top rate of stamp duty tax for a main residence property is 12%. However, foreign purchasers buying a second home in England or Northern Ireland face an even higher rate of 17%.
Overlooked Stamp Duty Reliefs
Cornerstone Tax has identified three commonly overlooked stamp duty reliefs that can result in overpayments. By understanding these reliefs, you can potentially save thousands of pounds on your stamp duty bill.
Relief for Buying Multiple Dwellings
If you’re purchasing more than one property in a transaction or a series of linked transactions, you may be eligible for relief. This includes freehold or leasehold interests in more than one property. By claiming this relief, you can effectively reduce your stamp duty bill and avoid any overpayments.
Lower Rates for Abandoned or Uninhabitable Properties
When buying a property that is abandoned or uninhabitable, you may be eligible to pay a lower rate of stamp duty or even qualify for a tax refund. This relief is particularly relevant for those looking to renovate a property or purchase a fixer-upper. By taking advantage of this relief, you can ensure that you’re not overpaying on your stamp duty.
Pension Scheme Sales
Many homeowners nearing retirement choose to sell their homes as part of Self-Investment Personal Pension (SIPP) schemes. These schemes allow individuals to invest the profits from the sale into their pension funds and pay stamp duty before the funds are deposited. However, administration errors can occur, leading homeowners to receive less than the 100% stamp duty discount they are due. By being vigilant and seeking professional advice, you can avoid such errors and ensure you’re benefiting fully from the stamp duty discount.
Minimizing the Risk of Overpaying
To minimise the risk of overpaying stamp duty, Cornerstone Tax advises homeowners to conduct a thorough analysis, seek professional advice, and understand the applicable regulations. By being proactive and staying informed, you can significantly reduce the chances of overpayment.
However, if you’ve already overpaid on your stamp duty, it’s not too late to correct the situation. Cornerstone Tax recommends initiating a review promptly, gathering evidence, and pursuing appropriate actions to claim a refund or make adjustments as required. Remember, rectifying an overpayment can help you recoup the money you’re owed.
In conclusion, stamp duty overpayments are more common than you might think. But with expert guidance, you can potentially save thousands of pounds and avoid unnecessary overpayments. By understanding the commonly overlooked stamp duty reliefs and staying informed about the regulations, you can navigate the world of stamp duty with confidence and ensure you’re not paying more than you should.