Since April 2016, an additional 3% SDLT surcharge applies to purchases of residential property by buyers who already own another residential property. This applies regardless of whether the existing property is in the UK or overseas, and regardless of whether it is held personally or through a company. The surcharge is calculated on the entire purchase price, not just the amount above a threshold, which means it adds a significant sum to the transaction cost.
The most common reclaim scenario is the replacement of a main residence. If you bought a new home while still owning your previous one, you will have paid the 3% surcharge at completion. If you then sell the previous property within 36 months, you can apply for a refund of the surcharge. The application must be filed with HMRC within 12 months of the sale of the previous property, or within 12 months of the filing date of the SDLT return on the new purchase, whichever is later.
The rules are specific. The property being sold must have been your main residence at some point. The new property must be intended as your replacement main residence. Where couples are involved, both parties’ property ownership positions must be considered. We review the full circumstances to confirm whether a refund is due before filing the application.
Separation and divorce: Where a property settlement means you are effectively replacing a main residence, the surcharge refund rules can apply, but the specific circumstances and timing must be assessed carefully.
Inherited property: Inheriting a property can trigger the surcharge on a subsequent purchase, but specific exemptions exist for inherited interests below a certain threshold. Whether the exemption applies depends on the size of the inherited interest and when it was acquired.
Properties that are not habitable: In limited circumstances, the surcharge may not apply where the property being purchased is not in a condition to be used as a dwelling. HMRC applies a strict test here, and tribunal decisions have narrowed the scope of this argument significantly. We advise on a case-by-case basis.
We review your completion documents, the original SDLT return, and the circumstances of both the purchase and any subsequent sale.
We assess whether a refund or amendment is valid, including checking the relevant time limits and eligibility criteria.
We prepare and file the refund application with HMRC, including all required supporting documentation.
We monitor the application through HMRC processing. Typical processing times for SDLT refunds range from a few weeks to several months depending on HMRC's workload and whether they request additional information.
Schedule a free 30-minute consultation to discuss your personal tax compliance.
