5 ways you could save thousands on your Stamp Duty bill

Posted 17th February 2022 by ctatax-admin

Five Ways you could save thousands on your Stamp Duty Bill (plus a bonus point)

Stamp Duty Land Tax (or SDLT) is one of the most complex and little understood taxes currently on the UK statute books. And yet this tax affects all buyers of property in England and Northern Ireland, meaning that in theory after income taxes it is the tax with the most far-reaching impact.

Ever since this property tax was introduced back in 2003, hundreds of thousands of buyers each year have paid their SDLT bill without any real idea of what it is they’re paying, why they’re paying it, or whether or not it’s even the right amount.

Not sure what Stamp Duty Land Tax is? Read our article

Cornerstone’s research into and experience within the area of property tax suggests that many of these people have paid the incorrect amount of SDLT, and that many more continue to do so.

In the last twelve months alone, we have helped homebuyers reclaim millions of pounds in overpaid SDLT direct from HMRC, and advised hundreds on current purchases to enable them to be sure they are paying the correct amount first time, saving them tens of thousands of pounds.

25% of homeowners with annexes could have overpaid Stamp Duty Land Tax – Read our feature in Financial Reporter

Want to make sure that you do not get stung on your Stamp Duty? Here’s five ways that you can help yourself:

1. Rate Checking

Starting at the beginning, the simplest and most obvious way you can save Stamp Duty is by way of “rate checking”your deal.

When buying a new property in whatever capacity – be it as a simple residence, and investment property or a commercial premises, you need to examine the details and use them to produce an absolutely accurate assessment of what the Stamp Duty liability for the purchase will be.

On average, one in five people who do this have found they are able to save thousands of pounds on what they might have paid had they simply relied on their solicitor and/or HMRC’s ‘SDLT Calculator’ to work out their liability – money that HMRC would have quite happily taken with the client none the wiser at the overpayment they had made.

Its not easy and its going to take quite a lot of reading but the outcomes are potentially the difference between that dream home or dream deal and nothing at all.

2. Checks your Reliefs – Multiple Dwellings

If you’ve bought a nice new home with an annexe, a block of flats,  or a row of houses, Multiple Dwellings Relief (a Relief in the SDLT legislation which reduces the SDLT bill on the acquisition of multiple properties in one transaction) is a no-brainer.

However, there are many other circumstances in which the relief may apply which are not so obvious. Partly this is thanks to the still nebulous definition of what is and is not classified in law as a ‘dwelling’ but mostly it is down – once again – to a lack of understanding and a lack of willingness to engage with the issue by property professionals. 

Read our article in Estate Agent Today

Estate Agents will simply not even think of it. Solicitors will instinctively shy away from anything which might involve the SDLT bill being looked at seriously, for fear of being wrong and having to deal with the consequences.

The truth is that there are thousands of properties each year which should benefit from MDR but where it is missed, costing tens or even hundreds of thousands of pounds to the people who buy them.

In the last year alone, claims against solicitors for having missed this relief have swelled exponentially. By looking at this one Relief, you may save yourself a lot of money before buying, or be in line for an unexpected windfall from HMRC if your purchase has already completed.

3. The 3% Surcharge

Paying the 3% surcharge- this is not all properties are liable for the residential rate of SDLT so, if they aren’t, neither are they liable for the 3% surcharge on its additional dwellings.

So if you’re buying a property that doesn’t qualify as residential then you shouldn’t be paying surcharge either and remember that the surcharge doesn’t have a nil rate band – is 3% of the whole price paid which can often add up to 10s of thousands of pounds even on the smallest transaction.

Quite often solicitors believe that simply because your name is on a title of another property but this qualifies it as an additional dwelling but this actually isn’t the case you have to be beneficially entitled to the property I.E entitled to occupy to receive income from it in order for it to be counted and even then certain kinds of property residential properties held in trading partnerships aren’t counted.

You need to do a careful review of any assertion that you are or were liable to pay the 3% surcharge against HMRCguidance and the law and decide whether you’ve paid are paying or will have paid it correctly.

4. The Market Value Trap

If you’ve been selling or transferring property between yourselves and any connected parties- family, business partners, your own company, pension scheme, trust, etc, then you’ve probably been advised, or believe, that you pay Stamp Duty on the market value off the property.

Simply put this isn’t the case particularly where there are two or more owners of the property and, if that is the case, then it’s almost certain but the tax is £nil.

This is a particularly esoteric area and requires more than a little reading but reviewing anything that you are doing, or have done in the last four years, will at least give you a clue that you might be about to, or already have, overpaid.

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5. Now that’s a (43 X) Relief!

Aside from multiple dwellings relief above there are 43 other reliefs from SDLT which in many cases can reduce it to absolutely nil!

Many of these are dependent on the relationship between the buyer and the seller some of them depend on, for example, the buyer being a property trader and the seller being dead, the victim of a broken chain, buying a new house from a house builder, or relocating his employment.

Similarly transfers between companies in the same corporate group don’t suffer the market value charges that are suffered by companies that aren’t and there are a number of other areas where, quite innocently, solicitors often miss the fact that a relief is available.

So a simple, but thorough, examination of all your circumstances and the circumstances of the transaction can bring benefits with just a little bit of research. 

The amount of Stamp Duty you pay is directly related – amongst other things – to the precise way in which you purchase the property or otherwise engage in a transaction such as a transfer. Landlords consolidating their portfolios into a limited company, investors looking to purchase an additional residential property.

Many types of buyer would benefit from ensuring that their purchases are structured in the most tax-efficient way possible, and minimising the SDLT liability on their transactions.

UK homeowners owed tens of thousands in Refunds – Read our article in The Express

6. Refunds

Already bought your property but not quite sure that the right amount of Stamp Duty has been paid? No problem, you are able to re-assess your historical transaction going back up to four years in order to ascertain whether the correct amount of SDLT was paid.

Examining every aspect of the purchase from your personal circumstances to the type of property and even how the transaction was specifically financed, you can determine the exact amount of Stamp Duty which should have been paid on your purchase. 

Where this number differs from what was actually paid, you will need to write to HMRC detailing exactly why the original calculation of tax was incorrect, what the calculation should be, and the amount of refund due.

Buying property can be the most stressful, most expensive time of one’s life. Legal fees, estate agents fees and various other associated expenses all mount up. Why let your Stamp Duty bill be higher than it should be?