I recently posted a video to YouTube about Stamp Duty. I paid £276,000 in tax when I bought my house. That is more than the price of many houses! This is my personal home, so I don’t mind. But when I buy investment, I try to minimise my tax bill as much as legally possible. In the past I was only focused on making as much money as possible, but as my tax bill has grown, I am now focused on keeping it too.
The more money you keep and don’t pay out in taxes, the more good you can do. You can give more to charity, expand your business, buy more property and look after your family/community. If you are investing in property you need to know how to limit your Stamp Duty tax bill. In this article, I will give you 3 easy ways to cut down on Stamp Duty.
This is not tax or financial advice. Before taking action, please seek independent tax advice. This is my personal experience and offered for informational purposes only.
1. Buy A House That Is Uninhabitable
If you buy a house that is uninhabitable, you don’t have to pay stamp duty tax. This could be because the property has no hot water, there is extensive damp, there is no heating, etc. This is particularly good for those doing the buy, refurbish, refinance, rent (BRRR) strategy as this often involves buying such properties.
You will normally need to be able to buy with cash or bridging finance when buying uninhabitable properties. That is because you can’t get a mortgage against a property that cannot be lived in. This reduces competition for these kinds of properties, which is a huge advantage to investors that know what they are doing.
2. Multiple Dwelling Relief
If you are buying a property that contains a number of individual dwellings, such as flats, you could be eligible for Multiple Dwelling Relief. Multiple Dwelling Relief allows you to reduce your Stamp Duty tax bill. When I bought my castle, Ribbesford House in Worcestershire using Multiple Dwelling Relief, it reduced our Stamp Duty bill down from £81,000 to £8,000!
Make sure your accountant takes this all into account when working on what you owe. Don’t rely on the professionals alone to find all your deductions. Work with them to help you to get the best deal. You are responsible for your own tax bill even when working with an accountant.
3. Buy A Company That Owns A Property
If you buy a company that owns a property rather than buying the property directly, you could reduce your tax bill to 0.5%! When you are buying a property, ask if the property is owned in a limited company and if it is possible to buy that company. This is a great way to save on tax and is something I have done many times.
If you need some help getting started in property, I have a free course coming up soon. You can book a free ticket here. I hope to meet you soon, and hopefully we will get a chance to talk tax and property in person!