In­vest with­out stamp duty

Eight ways to lessen the bur­den of the tax­man

The Daily Telegraph - Property - - Front Page -

For first-time buy­ers, it can mean the ex­tra few thou­sand pounds that stands be­tween them and the prop­erty lad­der, while for wealthy home own­ers it’s rea­son enough to stay put and spend the money on a big ex­ten­sion, rather than trade up. It hits buy-to-let land­lords with a dou­ble whammy of a three per cent sur­charge af­ter it was hiked last April – and don’t even men­tion it to Lon­don es­tate agents who blame it for hav­ing seized up much of the mar­ket.

In an oth­er­wise hugely di­vi­sive prop­erty mar­ket, stamp duty land tax (SDLT) is the great lev­eller, in that no one wants to pay it. But you can still in­vest in prop­erty with­out pay­ing stamp duty; here are eight of those ways.

1 Buy a hol­i­day lodge

With their open-plan, in­te­rior de­signed, top-notch kitchens and hot tubs on the deck, hol­i­day lodges have come a long way from the old per­cep­tion of glo­ri­fied car­a­vans for cheap, and not al­ways so cheer­ful, hol­i­days.

By virtue of be­ing mo­bile – though few own­ers move them – they are ex­empt from SDLT, a sweet­ener that tempts a wide range of buy­ers, ac­cord­ing to the Dream Lodge Group (the­dream­lodge­ It has eight parks in the UK and lodges for sale rang­ing from £70,000 to £400,000, plus an­nual ground rent (or time­shares from £25,000).

“Most peo­ple go for the higher end lodges now,” says com­pany sec­re­tary Lisa Moir. “They have spare cash to in­vest or they’ve been left some money and are look­ing for a hol­i­day home. We get a lot of ex­pats whose home is in Spain and their hol­i­day lodge is their UK base, and we see in­vestors who buy to get a guar­an­teed eight per cent re­turn.”

For Sheila and Mau­rice Pen­hal­low, a re­tired cou­ple in their 70s from Selsey in West Sus­sex, it was a bad ex­pe­ri­ence with buy-to-let ten­ants that drove them to sell up their bricks and mor­tar in­vest­ment prop­erty and buy a £235,000 two-bed­room home through the Dream Lodge Group near Honi­ton in East Devon in­stead.

“There was no stamp duty to pay, which is a bonus. It came fully fur­nished down to the cut­lery and cof­fee maker, and we get six weeks’ us­age a year. Dream Lodge rents it out for us for the rest of the time,” says Sheila. “Our lodge is beau­ti­ful – it’s de­signed and dressed like a five-star prop­erty, and it’s a great in­vest­ment.”

2Buy a barge

All house­boats are free from stamp duty. “If it floats it’s ex­empt, as a home is only sub­ject to tax if it’s on land,” says Nigel Day of River­homes. There is an ex­cep­tion: if the house­boat comes with a large gar­den, such as some of those moored at Taggs Is­land near Hamp­ton in south-west Lon­don. “It’s not the float­ing home that at­tracts SDLT but the gar­den,” ex­plains Day.

House­boats come with other costs, though. Marine mort­gages are hard to come by, and are deeply un­gen­er­ous in their terms, with high in­ter­est rates and large de­posits re­quired, so many ven­dors spec­ify cash buy­ers only.

You must also fac­tor in moor­ing costs, which de­pend on the lo­ca­tion and length of boat. River­homes has a one-bed­room 70ft house­boat for sale in Lime­house, East Lon­don, for £150,000, with an­nual moor­ing and main­te­nance fees of £11,600 (river­

De­mand for house­boats has soared in re­cent years, due to the rise in house prices and stamp duty rates. Lee Thorn­ley, founder of the ar­ti­san tile com­pany Bert & May, is sell­ing his barge which is cur­rently on a canal in Beth­nal Green, east Lon­don, for £90,000 (bertand­

3Buy a prop­erty for un­der £125k

Prop­er­ties un­der £125,000 are also ex­empt from stamp duty. This ap­plies as well to shared own­er­ship, if the share costs less than £125,000.

Se­qure Prop­erty In­vest­ment has spot­ted an­other trend: young Lon­don­based pro­fes­sion­als are rent­ing in the cap­i­tal and get­ting on the prop­erty lad­der by buy­ing a prop­erty for less than the min­i­mum SDLT thresh­old else­where in the coun­try – usu­ally the North, in a scheme such as Vic­to­ria Mill in Stock­port, where one-bed­room flats start at £97,000 (se­

Ben Har­wood, a 26-year-old yacht char­ter man­ager, rents in Lon­don and re­cently bought a new-build flat in Manch­ester’s Spin­ning­fields area for £120,000. “I did a lot of re­search and looked at ISAs, but found the rates were very low. I knew I could get guar­an­teed re­turns from prop­erty but wasn’t in a po­si­tion to buy in Lon­don so I had to look else­where,” says Har­wood. “Manch­ester of­fers higher yields and bet­ter growth po­ten­tial. I’m sav­ing all the ex­tra monthly in­come I re­ceive so I can even­tu­ally buy in Lon­don for my­self.”

4 Get the devel­oper or ven­dor to pay the stamp duty for you

Many de­vel­op­ers of­fer to pay the buyer’s stamp duty as a way to shift re­main­ing units. This

In an oth­er­wise hugely di­vi­sive mar­ket, stamp duty is the great lev­eller

is par­tic­u­larly the case with homes aimed at first-time buy­ers, who might strug­gle to pay stamp duty up front, hav­ing just saved up for a de­posit.

One ex­am­ple is Crest Ni­chol­son’s Dy­lon Works in Sy­den­ham, south-east Lon­don, where flats start at £308,997, which means a stamp duty sav­ing of £5,450 (crest­ni­chol­

The re­vised stamp duty levies mean that de­vel­op­ers are also dan­gling “stamp duty paid” car­rots in front of buy­ers with big­ger bud­gets. “At the £1.5mil­lion-plus level, buy­ers are of­ten as­set rich but cash poor and have to be en­ticed,” says An­drew Brooks, man­ag­ing di­rec­tor of Bew­ley Homes. His com­pany will cover the tax bill of £88,750-£129,150 for buy­ers of three de­tached houses at Hol­combe House Gar­dens in Sun­ning­dale, Berk­shire, on the mar­ket for £1.45mil­lion to £1.795mil­lion (bew­

This doesn’t just ap­ply to new prop­er­ties. The ven­dors of the 19th­cen­tury Hope Farm and Cot­tages in Lymp­sham, Som­er­set, for sale at £1.25mil­lion through Hum­berts, will pay the buyer’s stamp duty; it is just five per cent as the cot­tages count as a com­mer­cial busi­ness (hum­

5 Buy in bulk

This is a low rather than no stamp duty so­lu­tion – and one for the wealthy only, as you need to buy six or more units in the same de­vel­op­ment at the same time in or­der to pay just four per cent stamp duty.

“Mainly for­eign buy­ers, par­tic­u­larly from the Far East, are cap­i­tal­is­ing on this loop­hole, which is part of the old SDLT sys­tem that was left un­re­formed,” says Alex Stocker, man­ag­ing di­rec­tor of devel­oper Sons & Co. He is see­ing in­ter­est from bulk buy­ers in his schemes such as Pinks Mews in Lon­don’s Hol­born, where flats start at £995,000 (

“These buy­ers are look­ing to put se­ri­ous cap­i­tal into the prime Lon­don mar­ket as quickly as pos­si­ble, and view this stamp duty loop­hole as an ef­fi­cient means of do­ing it. There is also a grow­ing trend of high net­worth pur­chasers from the Mid­dle East us­ing the rule as a way to si­mul­ta­ne­ously buy a lux­ury pri­vate res­i­dence and a high-end in­vest­ment port­fo­lio,” says Stocker.

6 Be­come a prop­erty crowd­fun­der

De­terred by the in­creased costs in­volved in be­ing a tra­di­tional buy-to-let in­vestor, ex­ist­ing and would-be land­lords are turn­ing to­wards crowd­fund­ing plat­forms such as the House Crowd (the­house­crowd. com). The prop­erty crowd­fund­ing in­dus­try is set to grow to $250bil­lion world­wide by 2020, and has be­come a pop­u­lar way to in­vest in prop­erty and get a share of rental in­come with­out the has­sle of man­ag­ing a buy-to-let.

You still pay SDLT but split be­tween in­vestors, the amount per per­son is neg­li­gi­ble. In a re­cent house pur­chase in Manch­ester by the House Crowd, the 56 in­vestors paid an av­er­age of £67 each in stamp duty.

New web­site Homegrown ( of­fers a dif­fer­ent model, al­low­ing in­vestors with as lit­tle as £500 to buy into new de­vel­op­ments. When the prop­er­ties are sold, they ben­e­fit from the cap­i­tal up­lift. It also comes with added perk that it’s SDLT free.

“Joint ven­tures be­tween eq­uity in­vestors and de­vel­op­ers have his­tor­i­cally been re­served for in­sti­tu­tional and pro­fes­sional in­vestors, but crowd­fund­ing means that ev­ery­day in­vestors can buy into these pro­jects too,” says Homegrown’s chief ex­ec­u­tive, An­thony Rush­worth. “It’s also a way to pro­vide eq­uity fi­nance for smaller de­vel­op­ers to build more homes.”

7 Buy-to-let for un­der £40k

Even though there is no stamp duty for prop­er­ties cost­ing un­der £125,000, the SDLT sur­charge for ad­di­tional prop­er­ties kicks in af­ter £40,000 – so canny buy-to-let in­vestors are seek­ing to­tally SDLT-free op­por­tu­ni­ties un­der £40,000. “It’s still pos­si­ble to find them, par­tic­u­larly in ar­eas such as Burn­ley and Tee­side,” says Rob Bence, co-founder of on­line fo­rum The Prop­erty Hub (the­p­rop­er­ty­

“As well as be­ing ex­cep­tion­ally cheap, these prop­er­ties of­ten have at­trac­tive yields. Rental prop­erty is still in de­mand in these towns and rents are still able to rise – but don’t ex­pect much in the way of cap­i­tal growth.

“Also note that most of these prop­er­ties will house lo­cal hous­ing au­thor­ity ten­ants, which shouldn’t put you off in­vest­ing but comes with greater risks,” Bence adds.

8 Ex­tend your ex­ist­ing home

Many home own­ers are tak­ing a tan­gen­tial ap­proach to the theme, avoid­ing SDLT by in­vest­ing in a prop­erty they al­ready own in or­der to add value.

“It’s the most ob­vi­ous way to in­vest in prop­erty with­out in­cur­ring stamp duty,” says Rory O’Neill of Carter Jonas. “De­pend­ing on the scale and cal­i­bre of the work, ex­tend­ing a side re­turn, con­vert­ing a loft or dig­ging a base­ment can add up­wards of 30 per cent to the re­sale value of the prop­erty.”

The agency is mar­ket­ing Colton Lodge, a Grade II listed Queen Anne coun­try house in Tad­caster, North York­shire, for £3.5mil­lion, with a kitchen in its dra­mat­i­cally mod­ern ex­ten­sion (carter­

“We are see­ing home own­ers add en­tire wings to their prop­erty, cre­at­ing two- or three-bed­room guest suites or beau­ti­ful barn-style ex­ten­sions for the ex­clu­sive use of Airbnb-ers,” says O’Neill, “all with­out pay­ing a penny in stamp duty.”

Young Lon­don­based buy­ers rent in the cap­i­tal and get on the lad­der in the North

Open: a Dream Lodge, main, is stamp duty-free as it is a mo­bile home

Im­prove: a mod­ern kitchen in the ex­ten­sion of a home for sale with Carter Jonas, above

Aye aye cap­tain: Lee Thorn­ley, left, founder of the trendy ar­ti­san tile com­pany Bert & May, is sell­ing his barge for £90,000

Homey: in­side a Dream Lodge, above, which costs from £70,000 to £400,000

Make waves: Thorn­ley’s barge is on a canal in Beth­nal Green

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