Stamp Duty Land Tax (SDLT) investigations by HM Revenue and Customs (HMRC) have risen sharply over the past year, reflecting greater scrutiny on property transactions across the UK.
New data from accountancy firm Lubbock Fine reveals that the number of stamp duty probes climbed by 88 percent in the 2024/25 tax year, amid increased efforts by authorities to identify underpayment or avoidance of SDLT.
This trend follows growing public attention to compliance after several high-profile cases involving senior political figures, and signals a broader enforcement drive affecting families and property buyers nationwide.
Scrutiny of Stamp Duty Land Tax intensifies
HMRC has stepped up its monitoring of property transactions, targeting cases where buyers may have underpaid stamp duty or misrepresented their circumstances.
In the 2024/25 financial year, SDLT investigations reached 3,035, up from 1,617 the previous year, according to Lubbock Fine. The intensified focus comes as government seeks to address both deliberate avoidance and errors amid the backdrop of ongoing reforms to property taxation.
Recent increases in SDLT on second homes have heightened the need for clear compliance. The surcharge rate for additional properties rose from 3 percent to 5 percent in October 2024, meaning purchasers of second properties now face significantly higher bills.
For example, on a £300,000 second home, SDLT now totals £20,000, compared with £11,500 previously. The liability on an £800,000 property stands at £70,000, up from £51,500 before the rate change.
Increased penalties and additional tax recovered
With more investigations underway, HMRC has seen a substantial rise in stamp duty recovered. The amount of additional SDLT recouped rose by 135 percent to £200 million in 2024/25, up from £85 million the previous year.
Tax advisers attribute this increase to both improved targeting and tougher enforcement measures against non-compliance. Graham Caddock, director at Lubbock Fine, stated that HMRC is placing 'particular scrutiny on second property acquisitions' as well as on complex or unusual transactions.
This follows concern that recent changes have created greater financial incentives for individuals to misrepresent their property status in order to minimise tax.
Drivers behind heightened investigation
The complexity of SDLT rules, especially regarding main residence status and second property ownership, has led to a spike in errors and attempted avoidance. Some buyers have transferred homes into trusts or to partners before purchasing additional property in the hope of bypassing the higher rates.
Others have attempted to claim main residence relief while retaining an interest in another property. Caddock explained, 'HMRC examines a wide range of factors to determine what counts as a main home. Transfer of ownership into a trust or to a partner does not necessarily exempt from the second property charge.'
A further area of concern is the misclassification of residential properties as commercial or mixed-use in order to attract a lower SDLT rate. The criteria for such reclassification are strict commercial elements must be fully separated, unsuitable for living, and operational at the time of purchase yet some buyers make invalid claims, increasing their risk of investigation.
Common causes for SDLT errors
Incorrect SDLT returns can occur when individuals misunderstand the rules on replacing main residences, or when they attempt to exploit perceived loopholes such as transferring property to relatives or trusts.
Recent investigations have also targeted false claims for refunds, particularly where buyers assert that a property is uninhabitable to claim a rebate. HMRC has expressed concern about agents promoting ‘repayment schemes’ that suggest homeowners can reclaim stamp duty paid by declaring that a property requires extensive repairs.
Official guidance is clear: if a property retains the fundamental structure of a home and is suitable for occupancy, standard residential SDLT rates apply, regardless of repair needs.
HMRC’s advanced detection methods
To support its enforcement activity, HMRC uses a range of data sources, including information from the Land Registry and reports from solicitors, accountants, and financial advisers.
In addition, a sophisticated artificial intelligence system called HMRC Connect analyses billions of records to identify potential instances of tax avoidance or evasion. Launched in 2010, HMRC Connect cross-references tax records with databases of property ownership, bank accounts, and investment holdings.
The platform draws on third-party data, as well as tip-offs from the public, to detect inconsistencies in reported income and property interests. HMRC also operates a financial reward scheme for whistleblowers, with payments reaching up to 30 percent of tax recovered.
Tax specialist Mark Barrett noted that since its introduction, Connect has been 'constantly upgraded' and functions as a digital detective, helping HMRC generate substantial additional tax revenue through improved detection.
Final Summary
A pronounced increase in HMRC stamp duty investigations indicates a stricter enforcement landscape, driven by recent regulatory changes and a focus on reducing tax avoidance.
The application of advanced analytics and data matching means property buyers must take extra care to ensure all disclosures are accurate and compliant with current SDLT rules.
Deliberate misreporting, reliance on questionable relief schemes, or failure to understand the implications of property transfers can result in substantial penalties.
As the complexity of property tax continues to grow, expert advice is more important than ever. Those seeking up-to-date insights and practical tax tools can access resources such as the Pie app for further support.
