The HMRC SDLT calculator is critically unreliable, resulting in yearly SDLT overpayments of £2 billion. Up to four in ten SDLT returns effected!
(5 minute read)
Today we’ll be discussing:
- What SDLT is
- Why the HMRC SDLT calculator get it so wrong
- How to find out if you overpaid
What is SDLT?
Stamp Duty Land Tax (or SDLT) is a tax you pay when you buy property over a certain value in England and Northern Ireland.
You become liable for SDLT when you buy residential property worth over £125,000 or commercial property worth over £150,000.
The tax works on a tiered system where you pay based on the portion of the property value above certain amounts.
For example, let’s say you buy a home for £175,000, £50,000 over the tax-free amount. If this is not a second home, you pay SDLT at 2% on the £50,000 taxable portion. In this instance, SDLT is £1,000.
The basic rates are as follows:
|Portion of Property Value||Tax Rate (For First Properties)|
|Up to £125,000||0%|
|From £125,001 to £250,000||2%|
|From £250,001 to £925,000||5%|
|From £925,001 to £1.5 million||10%|
|Over £1.5 million||12%|
If you’re buying an additional property you’ll be subject to an additional charge of 3% on the whole price. If this applies to you, see advice on reducing SDLT here.
This is a self-assessed tax, meaning you’re responsible for paying the correct amount. Even if you employ a solicitor or accountant to do the work, the responsibility still falls on you, the buyer.
SDLT may sound relatively straightforward, however, it is deceptively complicated.
How SDLT is Calculated
Although you can calculate SDLT with pen and paper, that method if usually overly simplistic. Most people calculate their SDLT obligation through online calculators.
There are several SDLT calculators online, some paid for and some free. However, the most ubiquitous one is the official HMRC SDLT calculator.
Naturally, a tax calculator with HMRC’s stamp of approval is seen as the most accurate, reliable and trustworthy.
Each year thousands of new homeowners use the calculator to work out their SDLT liability. The HMRC SDLT calculator is trusted by homeowners and professional solicitors alike.
However, there’s one big problem with this.
The HMRC SDLT calculator is critically unreliable.
Why is the HMRC SDLT Calculator so Unreliable?
HMRC have admitted that their SDLT calculator is unreliable. Despite this, they still send mixed messages over its use.
When speaking with The Times, they claimed the tool is a ‘guide’ rather than an accurate calculator. However, their website still claims that it ‘will work out the SDLT payable for most transactions.’
This raises the question: how is one to know if their transaction isn’t like ‘most?’
That much is clear from the £2 billion of SDLT overpaid per year.
There are two main reasons for overpayment of SDLT: The HMRC SDLT calculator’s unreliability and the overly complex tax law.
SDLT rules are constantly changing, and there are currently nearly 50 different exemptions or discounts that could be applied. Each one of these rules interacts with others, creating a tangled web of complicated rules.
In such circumstances, it is very easy to miss small pieces of legislation that are pertinent to a purchase.
The difficulty of the rules means that there is high demand for tools to make calculating SDLT easier. But the HMRC SDLT calculator simply doesn’t consider all the tax laws when working out your obligations.
A calculator that could do so may be too difficult for many people to use effectively.
These miscalculations aren’t only felt by those who work out their own SDLT liability. Even professional solicitors use this calculator.
Solicitors and the HMRC SDLT calculator
If the HMRC SDLT calculator is so unreliable, why do solicitors across the country use it?
SDLT is complicated and HMRC’s calculator is the most widely available tool for working it out.
In addition to this, it is not uncommon for time-pressed solicitors to be crunching the numbers without supervision from an SDLT expert. As a result, mistakes can easily be missed.
Fortunately, awareness of the complexities of SDLT is increasing and some solicitors are employing specialists.
But progress is slow and uneven, leaving clients unsure about whether they paid the right amount.
What to Do if you Think you Overpaid
Generally, you have one year to amend your return form and fix minor mistakes. However, you can apply for a refund if you’ve overpaid for up to four years.
Although it is possible to go through the amendment and refund process yourself, doing so can be risky.
With the assistance of a specialist like Tax Expert, you can rest assured that you only pay what you need to.
At Tax Expert, our team of specialists have years of experience in looking out for our client’s best interests. By digging through the web of SDLT laws, we get you as a big a refund as possible.
We also deal with HMRC on your behalf, taking the stress of out SDLT.
We operate on a no win, no fee basis and only charge a modest percentage of the money you receive from HMRC. There’s nothing to lose by simply checking your eligibility.
Kind regards Ilyas