Confusing stamp duty rules led to overpayments

According to the new figures, 25 per cent of UK homeowners with annexes may have overpaid stamp duty. Therefore, about 10,000 homeowners were not told that they could have paid less tax at the time of purchase.

Buying a property with an extension is becoming more and more relevant for buyers looking for a home with long-term opportunities. One of the lesser-known advantages of owning a property with a separate annex is that you may be eligible for multiple dwellings. Accordingly, you can pay a reduced stamp duty.

Earlier, the year before the holiday, the homebuyers paid 13 billion pounds. Due to errors in advice and convoluted rules, more than 3 billion pounds of stamp duty was overpaid in 2015 and 2016.

David Hannah from Cornerstone Tax’s said, that it is quite difficult to understand all the details of SDLT, especially with the nine-month vacation ending in March 2021. This confusion among homebuyers about the ever-changing nature of the tax could sooner or later increase.

Cornerstone Tax also reports that 25% of homeowners who have an extension to their property were not advised that they could have paid the reduced stamp duty rate on their property at the time of purchase. This often results in homeowners being required to return tens of thousands of pounds of stamp duty.

David Hannah, principle consultant and founder of Cornerstone Tax, said: “This research demonstrates a lack of clarity in and around stamp duty land tax, both by the public and by the legal sector.

“Millions of properties across the UK could qualify for reduced stamp duty rates, if for example, they have a self contained side annex as part of the property. In these cases, solicitors have a duty of care to inform their customers of all potential stamp duty reductions, including where Multiple Dwellings Relief is available.

“The mistakes being made are in almost all cases totally unintentional and otherwise made in fear of underpaying. Most legal professionals are ill-equipped to navigate the complex rules around it and need help.

“The law around SDLT is incredibly complex and many advisors who help homebuyers evaluate how much they should pay are trained only to differentiate between residential and commercial property.

“They simply aren’t familiar with the intricacies of the law’s evaluation criteria, which has led to many being mis-advised unintentionally. There are a number of other reasons why people have overpaid; it’s not always a misinterpretation of the 3% surcharge.”