How to save £1000s in stamp duty

STAMP DUTY WAS REFORMED 4th DECEMBER 2014

THIS ARTICLE IS NOW OUT OF DATE - PLEASE READ NEW STAMP DUTY AND WHAT IT MEANS FOR ME TO LEARN ABOUT THE CHANGES.

Stamp duty is a much hated tax as it very quickly adds up to huge figures in the thousands for even the smallest of budget housing. You can read our guide to what stamp duty is and how much it will cost you if you are unsure of the details but for brevity it will cost first buyers a few thousand pounds or a small young family in the south east of England upwards of £10,000.

Over £10,000 in stamp duty?

Yes! The way the banding works a young family looking to move to a modest house somewhere in suburban London or South East England would be looking at houses around £350k, which would incur 3% tax or £10,500!

Can I pay less stamp duty?

It is possible to greatly reduce the amount you will have to pay in stamp duty if you are close to one of the stamp duty bands. Say you are looking to buy a property for £255,000 you will have to pay £7,650 in stamp duty as anything above £250,000 is in the 3% bracket! Lets look at how to reduce this massive £7,650 tax bill:

Method 1: Negotiate

You must try and negotiate with the seller to reduce the price down to at most £250,000 as at this point you will only have to pay 1% in stamp duty, which make a more affordable £2,500. A saving of £5,150 (and of course the other £5,000 you got off the asking price).

Method 2: Get clever

What if you have already negotiated this property down from £270,000 and the seller will not budge any lower than £255,000? You really like this house so how can you get it below the 3% threshold?

It is entirely legal to split the fixtures and fittings such as carpets, curtains and lights from the sale of the property and handle these and the property as separate transactions. If the property could have £5,000 of fixtures and fittings then have your solicitor split the transaction into a property purchase and a fixtures and fittings purchase. Now that the property is only selling for £250,000 the purchase will be at the 1% level, reducing your tax bill from £7,650 to £2,500, that's a saving of £5,150!

Method 3: Get someone else to pay it for you

Some mortgage lenders will offer to pay your stamp duty for you as part of a promotion. Halifax offered this last year, now TSB are offering the same. The terms are usually that the property you are buying falls into the 1% bracket which means property prices between £125,000 and £250,000.

Other dirty tactics

I have read about companies offering to get you out of stamp duty. In exchange for a hefty fee, they claim to use legal loopholes that remove the need for paying stamp duty. Do not trust these companies, one way or another if you buy a home you must pay stamp duty if it is above £125,000 in value. Tax evasion is illegal so do not take risks with these companies, they are bad news.

Read our guide to stamp duty for further details on this unpopular tax and an idea on how much it could cost you.