Stamp Duty Land Tax (SDLT) has been a big thing for everyone purchasing property in England and Northern Ireland for decades. Additional surcharges have been imposed in the past few years for the purchase of second homes, buy-to-let properties, and foreign investors — originally at 3%, then most recently raised to 5%.
This rush has left everyone asking: why is the SDLT surcharge up? And what happens if buyers think that they will be due a 5% SDLT surcharge refund claim? Let’s examine the history of this policy change and what this means for property investors and buyers alike.
Background: The 3% SDLT Surcharge
In 2016, the UK government charged a 3% surcharge on top of normal SDLT rates for buyers acquiring second residential properties. The idea was to suppress demand from second-home owners and investors and give first-time buyers a better chance in a competitive property market.
The surcharge was applied on:
- Buy-to-let houses
- Second homes
- Holiday lets
- Overseas purchasers of UK property
Since then, this surcharge has generated significant tax income while also somewhat dampening the speculators’ enthusiasm.
Why Was the Rate Increased to 5%?
The 3% to 5% shift that was implemented in certain categories and zones from 2024 onwards is intended to fulfil a series of government aims:
- Governing Housing Affordability – House values have been making homeownership unaffordable to many first-time buyers. The higher surcharge is intended to deter investor competition, leaving more properties to owner-occupiers.
- Increasing Revenue for Public Services – The SDLT surcharge is now a major source of revenue. The higher 5% rate is forecasted to bring in hundreds of millions of additional tax income — funds that can be spent on local infrastructure, social housing, or other good causes.
- Stopping Overseas Investor Activity – Certain markets — especially London and major cities — have been exposed to significant foreign investment. Raising the surcharge again discourages speculative buying by non-residents and helps maintain the market balanced for UK-based buyers.
- Policy Alignment Across the UK – There were previously higher rates on second homes and investment property in certain regions of the UK, such as Scotland (LBTT) and Wales (LTT). The increase makes SDLT policy more aligned to these regimes to create consistency and fairness across the countries.
Who is Affected by the 5% Surcharge?
The 5% surcharge typically impacts:
- Purchasers of second homes
- Buy-to-let investors
- Corporate buyers acquiring residential property
- Overseas individuals or groups acquiring UK residential property
It’s also worth mentioning that there may be exceptions in certain circumstances, especially for mixed-use residential premises or if you replace a main residence.
Can You Get a Refund of a 5% SDLT Surcharge Refund?
In some cases, the buyer of property can qualify for refunding the 5% surcharge — which is generally applicable when something changes after buying the property. Common situations where a 5% SDLT surcharge refund claim can occur include:
- Selling a main home within a set timeframe after acquiring a new one
- Errors in the method of originally calculating the surcharge
- Incorrect categorisation of the property (for example, if mixed-use)
Purchasers can claim online or through an agent, typically within 12 months of the filing deadline for the original return, says HMRC.
Why It’s Worth Seeking Professional Advice
It is usually difficult to navigate the intricacy of SDLT — especially top-rate surcharges — and most purchasers overpay or miss refunds simply because they are unaware of the rules.
A property accountant or tax professional can help analyse your case, confirm eligibility, and claim a 5% SDLT surcharge refund for you. This prevents you from paying unnecessarily and keeps you in accordance with the existing tax laws. If you have any other questions, please do not hesitate to ask.
Conclusion
The increase from 3% to 5% for the SDLT surcharge is part of a broader government strategy to address housing affordability, increase tax revenues, and prevent speculative buying of houses. For those affected, being aware of the rules — and when a refund will probably be available — is essential to maintaining costs within check.
If you think you may be owed a refund or simply want to double-check your SDLT situation, going to an expert will provide you with reassurance and protect your finances.
