Stamp Duty Land Tax (SDLT) is the tax paid by property buyers in England, Wales and Northern Ireland. In Scotland, it’s the Land and Buildings Transaction Tax (LBTT).
How much you pay will depend on the value of the property you buy. Basically, there is no tax on house purchases up to the value of £125,000, 2% between £125,001 and £250,000, 5% between £250,001 and £925,000, 10% between that and £1.5m, and 12% on everything above.
But stamp duty has been seen many changes since it was first introduced in its current form. The recent budget made a change that could mean a major saving for some first time buyers. For properties valued above £500,000 you will pay SDLT at the normal rates.
If you are a recent first time buyer in a shared ownership property, you might be able to reclaim your SDLT payment.
In last year’s Budget, the Chancellor unveiled a cut in stamp duty for first-time buyers. There would be no stamp duty for first-time buyers for properties up to £300,000. Recognising that £300,000 does not buy all that much property in some parts of the country, it also meant that first-time buyers could have no tax to pay on the first £300,000 for properties worth up to £500,000.
The cut came as a relief to many struggling first time buyers, but things were a little more complicated for first-time buyers purchasing shared ownership properties.
When buying a shared ownership property, stamp duty can be paid as a one-off payment based on the total market value of the property or in stages as you increase your share of the ownership.
In the Autumn 2017 budget, the concession only applied where first-time buyers elected to pay the full duty on the full market value of the property (if it was over £300,000).
If a first-time buyer elected to pay duty only on the percentage of the property purchased (i.e. 25%) they would then also have to pay SDLT if they were to ‘staircase’ his or her share from that notional 25% to 50% or 100% ownership.
This seemed to be an anomaly, and the Chancellor has provided a solution. In his autumn budget this year, he announced that the first-time buyer stamp duty relief will apply to subsequent share purchases.
This means that first time buyers of shared equity property are now on a level playing field with those buying conventional leasehold or freehold property.
What’s more, Mr Hammond confirmed that this change will be backdated to 22 November 2017, the date of last year’s Budget, when the concessions were introduced.
How to reclaim overpaid stamp duty
Any first-time buyers with a shared ownership home who paid stamp duty on subsequent share purchases from the date of last year’s budget will be able to claim the tax back.
If you are among the numbers involved, you should get in touch with HM Revenue & Customs (HMRC). A claim needs to be done in writing to HMRC, with full details of the transaction. You will need to give the UTRN for that return – the unique reference number on the original stamp duty return, confirmation of the amount to be refunded and confirmation of who should receive the payment.
You can find the address and other details here.
You have some time to make the claim. You should be able to claim backdated refunds until 28 October 2019. You’ll receive a cheque for the amount you overpaid, as well as 0.5% repayment interest on top.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
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Sources:
yourmoney.com – First-time buyers: how to reclaim stamp duty paid on shared ownership properties – 30th October 2018
gov.uk – Stamp Duty Land Tax: shared ownership property – 14th December 2017
