You must wonder about what is stamp duty and land tax? So, in simple terms, stamp duty and land tax (SDLT) is a tax paid on the purchase of property and land sales in England (the rules vary slightly in Wales and Scotland and Northern Ireland have their own rules)
If you’re a first-time buyer, you won’t have to pay second-home stamp duty and should benefit from first-time buyer stamp duty rates. Same applies for anyone buying property below the stamp duty threshold or if a property is gifted to you. In some instances, you can even apply for a stamp duty refund.
There are a few opportunities for people to avoid paying stamp and several to legally minimise it, below our property accountants explain more.
How to avoid paying stamp duty?
People buying their first property can avoid stamp duty by benefitting from first-time buyer relief, providing the purchase price is below £500,000
Those who are not first time buyers but are buying a property at a price below the stamp duty threshold ( from April 1, 2025, at £125,000); are not liable for this tax.
Other ways to legitimately avoid stamp duty include:
- When the property is classified as “non-residential”;
- When gifted a property (where the deeds were transferred mortgage free);
- When bequeathed a property in a will (although Capital Gains tax could apply)
People who manage to haggle down the price of the property can minimise the tax by keeping it within a band where the surcharge is lower.
Beneficiaries of multiple dwellings relief (MDR) can also reduce or minimise stamp duty on all the properties they are purchasing.
Developers of 15 or more properties can minimise stamp duty on all the properties they are developing, so that they do not pay stamp duty on the first purchase from the owner of the land.
If you are transferring properties between companies then you can also benefit from a reduction in stamp duty.
Companies can claim a stamp duty relief when the same group of companies buy property from each other, where both buy and seller are companies.
There are a few ways to avoid paying stamp duty legally, and quite a few to minimise or reduce the tax. Trying out schemes to avoid paying SDLT is not advisable and a serious breach of tax law.
Instead we would recommend speaking to a professional tax accountant such as CloudCo for advice.
What ways are there to minimise stamp duty land tax?
The first-time buyer relief threshold is £500,000 (from April 2025), so if the property you are hoping to buy is below £500,000 then the nil-rate SDLT rate will apply.
For residential properties, first-time buyers will not pay any stamp duty if they buy a property under the value of £300,000.
On property values between £300,001 and £500,000, a 5% SDLT rate applies.
The relief is available to purchasers who have not previously owned or had previous financial/ownership in a property.
The property being purchased must be intended as a main residence; e.g. it cannot be claimed against a property being purchased as a buy-to-let or as a holiday home.
You can reduce stamp duty by purchasing the property for a price under the nil-rate or beneath one of the SDLT bands.
Current SDLT rates for main residences are as follows:
| Property Value Band | SDLT Rate (Main Residences) |
|---|---|
| Up to £125,000 | 0% |
| £125,001 to £250,000 | 2% |
| £250,001 to £925,000 | 5% |
| £925,001 to £1.5 million | 10% |
| Above £1.5 million | 12% |
Source: SDLT rates
For first-time buyers:
| Property Value Band | SDLT Rate (First-Time Buyers) |
|---|---|
| Up to £300,000 | 0% |
| £300,001 to £500,000 | 5% |
Source: SDLT rates for First-time buyers
Purchase property under the threshold
Even though the nil-rate stamp duty and land tax (SDLT) rate threshold is now £125,000, purchasing property under this in most of the UK’s major cities is probably a big ask, but this is a way to avoid paying stamp duty.
Finagling by paying separately for fixtures and fittings (is not advisable …)
Some people try splitting the price of the property and its fixtures and fittings to stay below a stamp duty band or to avoid it entirely.
You might get away with it, but a recent case Orsman v HMRC didn’t end well when the purchaser had to pay the total of £5,024 plus the original stamp duty sum of £2,500 when it was found that the 3% surcharge, which had been avoided due to splitting the £258,000 price (at the time, putting the property into the 3% band) had not been lawful under tax law.
It was found in court that the £8,000 apportioned to “chattels” to avoid the stamp duty band was in fact for fixtures. Therefore, the surcharge was due.
This method is not recommended to try to avoid paying or reduce SDLT.
Multiple dwellings relief (MDR)
MDR reduces the stamp duty on the purchase of property when more than one “dwelling” forms part of a single purchase.
However, MDR was abolished effective 1 June 2024 and is no longer available for transactions completed on or after this date.
Transitional rules allow MDR claims for contracts exchanged on or before 6 March 2024, provided the contract has not been changed. These claims must be made within 12 months of the filing date of the transaction.
The 3% tax rate applies if the multiple dwellings are purchased in addition to other residential properties owned by the same person or “related persons”.
You should consider seeking advice on MDR from a property tax accountant, lawyer, and/or conveyancer due to the notorious trickiness around these rules.
Learn more about multiple dwellings relief here.
Buying shares in an owning company rather than buying the property itself, can provide a means to reduce or entirely avoid stamp duty.
Offshore company property ownership is becoming far more common, but you should seek expert advice about how this can affect the tax liabilities of the company itself
New builds
Another way to avoid stamp duty on property is to buy a piece of land and build your own property on it, then you’ll only pay SDLT on the price of the land.
Some purchasers negotiate a deal with the developer of a new-build scheme to pay the stamp duty costs on their behalf or do a deal to reduce the purchase price to fall between or below the stamp duty bands.
This is done most often to guarantee the developer a sale.
Why is stamp duty applied to second properties?
Stamp duty is payable on second properties and buy-to-let properties because it will not be a main residence.
The main residence will have attracted the lower or nil rate of stamp duty scales depending on what the property cost at the time of purchase, but the second property will attract the 3% surcharge (depending on the value) at each stamp duty band.
Both second homes and buy-to-lets are treated as second properties.
The same second-home rules apply if you have a second property (holiday home) abroad and want to buy your first property in the UK.
A second home is exempt from the stamp duty surcharge only when:
- The property is valued under £40,000;
- Your share of the second property is valued below £40,000;
- The purchase is of “a moveable property” – i.e., a caravan, mobile home or house boat;
- There is seven years or less left on the lease of the property;
- If the property was inherited as a 50% or less share;
- On divorce or separation.
How do you get SDLT refunds on second property?
If you sell your previous main residence within three years/36 months of buying the second property, you can claim a stamp duty refund on the SDLT surcharge on the second property.
This is a rule designed to assist people who either had trouble selling their first property or needed to move home in a hurry.
It also helps people who have decided to swap their second residence for their main residence; couples who are moving in together; and separating or divorcing couples who co-own property.
How to apply for a stamp duty refund
You can apply for the refund online at gov.uk. Your claim should be processed within about 15 days but you will need to provide a number of details.
These include:
- Details about the property that attracted the higher rate stamp duty, the purchase date, the unique transaction reference, and the amount of tax paid on the property;
- Details of the property sold, the date of sale and the name of the buyer;
- Stipulate the sum you are reclaiming as a refund;
- The account number and sort code of the bank account you wish the refund to be made to.
Conclusion
It is always better to go for a minimising or reducing SDLT rather than try to come up with or get involved in a scheme that pretends it can help you avoid it entirely which is outside the legislated rules.
Unless you are certain you know all the rules and the calculations then it would be better to seek the advice of reputable tax accountant such as CloudCo. We will make sure that your intention falls 100% within the rules and/or to look at all the ways the transaction will work for you within the law.
There are quite a few legal ways to minimise what you will have to pay in stamp duty. It all adds up, when you consider that there are other legal ways to minimise all types of taxes through tax planning.
At CloudCo we have experience of this type of legal minimisation of taxes and can advise you and put into action the many ways to reduce your tax compliantly. Contact us to find out more.
FAQs
How to avoid stamp duty on second home?
SDLT surcharge in second homes cannot be avoided unless the property is under £40,000 or meets certain exceptions such as inheritance or lease conditions.
How to reduce stamp duty?
You can reduce stamp duty by negotiating a lower purchase price to stay within lower tax bands and considering new builds or buying land separately. First-time buyers can benefit from reliefs on properties up to £500,000. Additionally, purchasing properties below the nil-rate threshold and timing your purchase before SDLT changes can help minimise the tax payable.
How to avoid stamp duty on buy to let?
There is no such way to reduce the stamp duty on buy to let property in the UK, a 5% extra surcharge is added for these purchases in 2025-26. If the property costs less than £40,000, no stamp duty applies.
Buying shares in a company owning property may avoid SDLT, but professional tax advice is necessary.
Can stamp duty be avoided?
Complete avoidance is rare and risky; legal minimisation through reliefs and planning is recommended.
How much can I pay for fixtures and fittings to avoid stamp duty?
Apportioning part of the property price to fixtures/fittings is scrutinized strictly; recent cases penalize attempts to avoid SDLT this way.
