HM Revenue and Customs has refunded over £160 million to ordinary homebuyers hit with unexpected tax bills following last year’s 3% stamp duty hike, according to mutual insurer Royal London. Since April 2016, property investors looking to buy a second home have faced a 3% stamp duty surcharge as part of the Government’s plans to […]
HM Revenue and Customs has refunded over £160 million to ordinary homebuyers hit with unexpected tax bills following last year’s 3% stamp duty hike, according to mutual insurer Royal London.
Since April 2016, property investors looking to buy a second home have faced a 3% stamp duty surcharge as part of the Government’s plans to curb the buy-to-let market and free up property for first-time buyers.
While the tax was introduced to cool down the buy-to-let market, there is potential for people who aim to sell their current main residence and purchase a new one to fall foul of the tax if the sale falls through.
Helen Morrissey, personal finance specialist at Royal London, said: “HMRC’s approach to higher rate second home stamp duty risks causing severe financial hardship for homebuyers.
“House sales can fall through for all kinds of reasons and the last thing families need is to receive a bill totalling thousands of pounds because they have inadvertently found themselves owning two properties for a short space of time.”
Royal London the size of the bills received can be considerable depending on where in the UK the property is purchased.
Someone purchasing an average priced property (£320,168) in the South East could find themselves having to pay £15,613 in higher rate SDLT when they were expecting a stamp duty bill of £6,008.
Similarly, someone purchasing a property in North East England (£130,000) could find themselves facing higher rate SDLT of approximately £4,000 when they were only expecting to pay around £100.
Rather than charge people thousands of pounds and then expect them to claim a refund when their house sale eventually goes through, Royal London believes that the extra tax should only be payable if people are genuinely multiple-property owners.
For example, if two properties are still owned a year after the transaction, a second home stamp duty charge could be levied.
Morrissey said: “The fact you can get a refund at some point in the future is cold comfort to having to find the money to pay the bill – how many people have ready access to such sums?
“We need a more common sense approach. It would be far better for the higher rate of stamp duty payment to fall due on the first anniversary of the completion of the purchase. By this point any delays in the sale of a home could be resolved meaning home owners won’t have the stress of finding the extra money. There would also be a massive decrease in the number of refunds HMRC would need to pay out.”
