How to Avoid Stamp Duty! Legal Loopholes You Must Know

If you’re purchasing a property in the UK, you may be eligible for Stamp Duty Land Tax (SDLT) reliefs, which can reduce the amount of tax you pay. These reliefs apply in specific situations, such as first-time home purchases, company transfers, or charitable property acquisitions.

Even if no tax is due, you must complete an SDLT return to claim relief. Below is a detailed guide on SDLT reliefs and exemptions, including who qualifies and how they work.

SDLT Reliefs: Who Can Benefit?

Certain buyers and transactions qualify for SDLT reliefs, allowing them to pay less tax or, in some cases, no tax at all. HM Revenue and Customs (HMRC) provides specific guidance for the following scenarios:

1. First-Time Buyers

• If you are purchasing your first home, you may be eligible for relief on SDLT, meaning you pay less tax or none at all, depending on the property price.

2. Building Companies Buying an Individual’s Home

• If a building company purchases a homeowner’s property to facilitate a development project, SDLT relief may apply.

3. Employers Buying an Employee’s House

• When an employer purchases a home from an employee—for example, due to relocation—they may qualify for tax relief.

4. Local Councils Making Compulsory Purchases

• If a local council buys a property through a compulsory purchase order (CPO), SDLT relief may be granted.

5. Property Developers Providing Amenities

• Developers that build and transfer amenities (such as parks or public spaces) to local communities can receive tax relief.

6. Companies Transferring Property to Another Company

• In some cases, business property transfers between companies within the same group may be eligible for SDLT relief.

7. Charities Buying for Charitable Purposes

• Registered charities that purchase properties exclusively for charitable activities can apply for SDLT relief.

8. Right to Buy Properties

• Those buying properties under the Right to Buy scheme, which allows council tenants to purchase their homes at a discount, may qualify for reduced SDLT rates.

9. Registered Providers of Social Housing

• Social housing providers acquiring properties may receive SDLT relief under specific conditions.

10. Crown Employees

• Some Crown employees, such as diplomats or armed forces personnel, may be eligible for SDLT exemptions.

11. Property Investment Funds

• Certain property investment schemes, like Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs), can qualify for SDLT relief.

Important Update: You can no longer claim SDLT relief for multiple dwellings (previously available for buyers purchasing multiple properties in one transaction).

Exemptions: When You Don’t Have to Pay SDLT

In some situations, SDLT does not apply at all. You do not need to pay SDLT or file an SDLT return if:

No money or other payment is exchanged in a land or property transfer.
You inherit a property through a will.
A property is transferred due to divorce or dissolution of a civil partnership.
You buy a freehold property for less than £40,000.
You buy a new or assigned lease of 7 years or more, as long as:

• The premium is less than £40,000.
• The annual rent is less than £1,000.

 You buy a new or assigned lease of less than 7 years, as long as the amount you pay is below the SDLT threshold.
 You use alternative property financial arrangements (such as Sharia-compliant finance), where the financial provider pays SDLT instead when they buy the property under such agreements.

Additional SDLT Guidance

For more information, HMRC provides guidance on freeport tax sites, which may also impact SDLT liability in certain designated areas.

If you’re buying a property, it’s worth checking whether you qualify for SDLT reliefs or exemptions, as they can significantly reduce or eliminate your tax burden. Remember, even if no SDLT is due, you must still file an SDLT return to claim relief. For detailed guidance, consult HMRC’s official resources or seek professional tax advice.

FAQ’s