Property buyers are being urged to ensure they declare and pay the correct stamp duty or face potentially thousands of pounds in fines as HMRC almost doubles its investigations into property transactions.
Stamp duty land tax (SDLT) investigations rose 88% in the 12 months to 5 April 2025, jumping to 3,035 up from 1,617 in the same period in 2024, a Freedom of Information request to HMRC by accountants and business advisors Lubbock Fine shows.
The crackdown led to an extra £200 million in tax being recovered, up from £85 million in 2023/2024, an increase of 135%.
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An HMRC spokesperson told MoneyWeek the increase is due mainly to increased scrutiny of “rogue repayment agents offering to make SDLT repayment claims” for homebuyers.
“If a claim is inaccurate, people could end up paying more than the amount they were trying to recover,” they said.
Why are stamp duty investigations rising?
HMRC has seemingly intensified its scrutiny of property deals following the increase in additional SDLT rate for second properties from 3% to 5% in the October 2024 Budget.
The increase has created a greater financial incentive for purchasers of a second property to mislead HMRC and to claim that they do not own another home, something HMRC is believed to be mindful of, that could also lead to more investigations.
The increased complexity of the SDLT regime is another factor causing more people to make mistakes when declaring their taxes, upping the risk of being investigated by HMRC as a result, according to Lubbock Fine.
Lubbock Fine warns that as the penalties can reach tens of thousands of pounds, people should seek professional advice to avoid making costly mistakes.
Graham Caddock, director at Lubbock Fine, said: “With SDLT rules becoming increasingly complex and constantly changing, people are far more likely to make mistakes. Errors can be very expensive."
The public attention around Angela Rayner’s underpayment of SDLT is also expected to increase the number of investigations carried out by HMRC.
Caddock said: “After the recent public attention around the Angela Rayner case, HMRC is likely to step up its scrutiny on second property acquisitions.”
Rayner, the now-former deputy prime minister and housing secretary, was caught underpaying stamp duty on her £800,000 seaside flat, and was forced to step down.
Why would HMRC investigate stamp duty claims?
HMRC would investigate stamp duty transactions if it was suspicious the property buying and selling activities didn’t match up and so the correct tax hadn’t been paid.
According to Lubbock Fine, some HMRC investigations have involved:
Buyers falsely claiming they are replacing their main residence to avoid the SDLT surcharge on purchasing additional properties.Buyers transferring their home into a trust or to their partner before buying another property, which HMRC does not treat as valid grounds for avoiding the surcharge.
Caddock said: “HMRC looks at many different factors to decide what counts as your main residence. Whether a property has been transferred into a trust or a partner doesn’t necessarily carry much weight with HMRC.”
Many stamp duty investigations involve buyers wrongly assuming a property with some commercial use, such as self-contained rental flats, qualifies for a lower stamp duty charge, according to Lubbock Fine. However, that is only true in very limited circumstances.
To qualify, the commercial parts must be clearly separate, unsuitable for normal living, and the commercial activity ongoing when the property is bought.
Caddock said: “Many people wrongly assume that if a house has some commercial use, they can claim a lower SDLT. But if the property is still clearly suitable to live in, or if the commercial part isn’t properly separated, HMRC is likely to challenge that status.
“Similarly, if the commercial element of the property has only been added recently, HMRC is likely to claim it isn’t genuine and has been set up purely to obtain a tax advantage. That can end up costing people large penalties.”
‘Bogus’ claims for stamp duty refunds
The taxman has also been cracking down on what it describes as ‘bogus’ claims for stamp duty refunds. This where the buyer claims a property is not a residential home because it needs repairs and is not inhabitable.
HMRC is warning people purchasing properties to be vigilant of tax agents offering to secure stamp duty repayments on their behalf where a property they have bought needs repairs.
The taxman said it is “taking decisive action on spurious SDLT repayment claims”, using civil and criminal powers to deal with the minority who undermine the tax system.
Some tax agents have suggested that, for a fee, they can reclaim SDLT the buyer has already paid by saying that the property is non-residential because it’s uninhabitable, according to HMRC.
But making claims of this kind often leave the homeowner liable for the full amount of stamp duty, plus penalties and interest.
A recent Court of Appeal judgment in the case of Mudan & Anor v HMRC has confirmed that housing (“dwellings”) in need of repair are chargeable at the residential rates of SDLT, and that repayment claims based solely on a property’s condition are not valid.
This decision confirms HMRC’s long-standing view that if a property requires repairs but retains the fundamental characteristics of a dwelling, it is still suitable for use as a dwelling and attracts residential rates of SDLT. A key factor in determining suitability is whether a property had been previously used as a dwelling.
Anthony Burke, HMRC’s deputy director of compliance assets, said: “The Court of Appeal’s decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a stamp duty land tax repayment claim on their behalf.
“If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.”
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