The Most Common SDLT Calculation Errors Explained

Stamp Duty Land Tax (SDLT) is a frequently misunderstood aspect of property transactions. While the tax itself follows a tiered system, various rules, exemptions, and surcharges often lead to miscalculations. These errors can result in overpayments or underpayments, both of which can have financial consequences. At SCA Tax, we regularly see buyers, solicitors, and even accountants make mistakes when calculating SDLT. Here are some of the most common errors and how they can be avoided.

Misapplying SDLT Thresholds

SDLT is charged at different rates depending on the purchase price of the property. One of the most frequent mistakes occurs when buyers fail to apply the correct thresholds. Since SDLT follows a progressive structure, miscalculations often happen when portions of the purchase price are incorrectly taxed at the wrong rate. This can lead to buyers either paying too much or too little tax, with the latter potentially leading to penalties from HMRC.

Errors with the Higher Rate for Additional Properties

Purchasers acquiring an additional property are typically subject to a 3% SDLT surcharge. However, mistakes often occur in determining whether the surcharge applies. For example, if a buyer is replacing their main residence but has not yet sold their previous home, they may initially pay the higher rate but can claim a refund once the sale is completed - something that is often overlooked. Additionally, some buyers mistakenly pay the surcharge even when an exemption applies, leading to unnecessary costs.

Incorrect Classification of Mixed-Use and Non-Residential Property

Residential properties are taxed at higher SDLT rates than non-residential or mixed-use properties. A common error is applying residential SDLT rates to properties that qualify as mixed-use, such as a building with both commercial and residential elements. Since non-residential SDLT rates are typically lower, misclassification can lead to significant overpayments. Buyers should carefully assess whether a property meets the criteria for mixed-use status before submitting an SDLT return.

Overlooking SDLT Reliefs and Exemptions

Various SDLT reliefs exist that can significantly reduce the tax liability, but they are frequently missed. One of the most overlooked reliefs is Multiple Dwellings Relief (MDR), which applies when purchasing more than one dwelling in a single transaction. Similarly, First-Time Buyer Relief is often forgotten, which could save eligible buyers thousands of pounds. Other exemptions, such as those for charities or social housing providers, are also sometimes ignored, leading to unnecessary tax payments. Proper due diligence and expert advice can help ensure these reliefs are applied correctly.

Mistakes with Linked Transactions

When multiple properties are purchased from the same seller, they may be considered linked transactions for SDLT purposes. In such cases, SDLT should be calculated on the total consideration rather than on each property individually. Failing to identify linked transactions can result in either an underpayment or an overpayment of tax. This is particularly important for investors and developers purchasing multiple properties within a single deal.

How SCA Tax Can Help

SDLT miscalculations are more common than many buyers realise, and overpayments can sometimes go unnoticed for years. At SCA Tax, we specialise in reviewing past property transactions to identify errors and recover overpaid tax. If you believe you may have overpaid SDLT or want to ensure your next property purchase is tax-efficient, our team is here to help. 

We can also review your purchase pre-transaction to check whether you are eligible for any form of SDLT relief.

Get in touch with us today for a free assessment of your SDLT liability.