Can you reclaim higher SDLT after 12 months if an overseas property was worth less than £40,000?

Introduction

A common SDLT question arises where a buyer paid the higher rates for additional dwellings, but later discovers that an overseas property they owned may not have counted because its value was below the statutory threshold. The issue then becomes whether HMRC will repay the overpaid tax if the mistake is found after completion.

This matters because the higher rates can add a substantial amount to the SDLT bill. However, SDLT refund and amendment deadlines are strict. In many cases, the real question is not whether the surcharge was charged in error, but whether the taxpayer is still in time to correct it.

The Question

A couple bought a home in England and paid SDLT at the higher rates on the basis that one of them also owned a residential property overseas. They later realised that the overseas property was worth less than £40,000, so it may not have been a “major interest” for the purposes of the higher rates rules.

They believe the SDLT originally paid was too high and want to know:

• whether they can reclaim the overpaid SDLT after more than 12 months have passed since completion; and
• whether selling the overseas property within three years of the UK purchase would create a fresh right to a refund.

Nick’s Explanation

Nick’s core view was that the time limit is the main problem. In anonymised form, his answer was:

“Unfortunately, you are out of time. You cannot claim the relief beyond 12 months from the date of completion. That position has been upheld by the tax tribunals, which makes it very difficult to challenge the 12-month rule. If the claim had been made within time, it would likely have been straightforward.”

He also explained that selling an overseas property does not automatically create a refund right. A refund under the replacement of main residence rules is only available if the property sold was in fact the buyer’s previous main residence. If it was merely another dwelling, selling it later will not undo the higher rates charge.

He further clarified the timing point: where the replacement of main residence rules do apply, the previous main residence must usually be sold within three years of the new purchase, and the refund claim must then be made within 12 months of that sale, subject to the statutory rules in force.

The Law

The higher rates of SDLT for additional dwellings are contained in Schedule 4ZA to the Finance Act 2003.

In broad terms, the surcharge applies if, at the end of the day of the transaction, the buyer owns more than one dwelling and is not replacing their only or main residence.

For these purposes, a dwelling interest is generally ignored if it is worth less than £40,000. That threshold is important for minor or low-value interests, including some overseas properties. If the overseas property was genuinely worth less than £40,000 at the effective date of the transaction, it may not have counted as a relevant major interest for the higher rates test.

Where a taxpayer wants to correct an SDLT return on the basis that too much tax was paid, the key procedural rules are found in the Finance Act 2003. In practice, the normal route is amendment of the land transaction return within 12 months of the filing date. Outside that window, options are very limited.

There is also a separate refund mechanism where the higher rates were paid because the buyer had not yet sold their previous main residence at the time they bought the new one. If that former main residence is later sold within the permitted period, a refund can be claimed. But that rule only applies where the sold property was the previous only or main residence.

If a buyer argues that a property was not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That case confirms that “unsuitable for use” is not a light or easy test. However, that issue is separate from the £40,000 rule and does not assist where the real point is valuation and time limits.

Analysis

The position can be broken down into four steps.

First, ask whether the higher rates were actually due at the time of purchase. If the buyer’s overseas property was worth less than £40,000 on the effective date of the UK purchase, it may not have counted for Schedule 4ZA purposes. If so, the surcharge may have been charged in error from the outset.

Second, ask whether the taxpayer is still in time to correct that error. This is where many claims fail. Even if the SDLT was overpaid, HMRC is entitled to rely on the statutory time limits. Once the normal amendment period has passed, it is usually very difficult to reopen the return simply because the original filing position was wrong.

Third, consider whether any alternative statutory route applies. In this scenario, the main possible alternative is the refund mechanism for replacement of a main residence. But that only works if the property later sold was the buyer’s previous only or main residence. It is not enough that it was simply another property owned by the buyer, whether in the UK or abroad.

Fourth, if the overseas property was not the buyer’s previous main residence, selling it later does not create a new refund entitlement. The later sale does not convert an additional dwelling into a former main residence. So the three-year replacement rules would not help.

That means there are really two separate legal ideas:

• an argument that the surcharge never applied because the overseas interest was below £40,000; and
• a refund claim after sale of a previous main residence.

They should not be confused. The first depends on the original facts and strict amendment deadlines. The second depends on replacement of main residence and a later sale of that residence.

Outcome

If the overseas property was worth less than £40,000, the higher rates may well have been wrongly paid in the first place. However, if more than 12 months have passed since the relevant SDLT amendment deadline, the taxpayer is usually out of time to recover the overpayment through the normal statutory route.

Selling the overseas property later will only help if that property was the buyer’s previous only or main residence. If it was not, the later sale does not create a right to reclaim the higher rates.

Practical Steps

A reader assessing their own position should:

• confirm the effective date of the UK purchase and the SDLT filing date;
• establish the market value of the overseas property at the effective date of the transaction;
• check whether that overseas property was in fact their only or main residence in the three years before the UK purchase;
• review whether any sale of that former residence took place within three years of buying the new home;
• if relying on replacement of main residence, check the separate deadline for making that refund claim after the sale; and
• gather evidence such as valuation material, completion statements, SDLT return records, and proof of residence history.

Where the case turns on residence status, overseas ownership, or missed statutory deadlines, the detail matters. The legal answer often depends less on fairness and more on whether the exact statutory conditions and time limits have been met.

Conclusion

If an overseas property was worth less than £40,000, it may not have triggered the higher SDLT rates. But that does not mean HMRC must repay the tax at any time. In most cases, once the amendment window has expired, the claim is out of time. A later sale only helps where the property sold was the buyer’s previous main residence and the refund claim is made within the statutory time limit.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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