Home > Stamp Duty > How to Avoid Stamp Duty

How to Avoid Stamp Duty

By: J.A.J Aaronson - Updated: 8 Feb 2013 | comments*Discuss
 
Stamp Duty Avoidance Evasion Avoid

Stamp Duty along with inheritance tax, is one of the great pariahs of the tax regime. While people will sometimes go to extraordinary lengths to avoid having to pay the latter, it is thought that there is little that one can do about the former. While it is true that there are fewer steps that can be taken to avoid Stamp Duty, there are a number of possibilities that might help.

Avoidance and Evasion

In the first instance, it is important to note the difference between 'avoiding' tax and 'evading' tax. This article, and several others on this site, offer advice on tax avoidance; this describes the ways in which individuals or organisations can legally minimise their tax bill. Tax evasion, on the other hand, is illegal, and tends to rely on acts like falsifying accounts. Actions like these are inevitably discovered and punished severely.

The majority of ways in which you can hope to avoid Stamp Duty tend to have a fairly fundamental effect on the transaction itself, often going as far as determining which property or shares you will buy. If you are hoping to minimise a Stamp Duty Land Tax (SDLT) bill (the duty paid on property transactions), one of the most enticing tax breaks available relates to property in so-called 'disadvantaged areas'. This is a scheme devised by the government to encourage the regeneration of less successfully developed areas by offering a tax incentive to those who purchase property there. Currently the non-payment threshold for SDLT is raised to £150,000 on property bought in these areas.

The HMRC and Directgov websites have search engines through which you can ascertain whether or not individual postcode areas are eligible for this form of tax relief.

Sale Prices

It sounds rather obvious, but perhaps the most effective way of mitigating your SDLT liability is by paying less for your property. If you can negotiate a price that is lower than the non-payment threshold (currently set at £125,000), you stand to save a considerable amount of money. Indeed, simply reducing the purchase price to below the threshold of any of the subsequent brackets can lead to large savings, particularly if the price drops below £250,000 as any sales of property above this price are subject to a minimum of 3% tax to a maximum of 7%.

While you are thinking about minimising your tax bill on property, it is also worth considering the tax implications that would apply were you ever to sell up. In this case, you should note that fixtures and fittings, as well as outbuildings like a garden shed, are classed as 'wasting chattels'. This means that they are exempt from Capital Gains Tax. As a result, you shouldn't be reticent about selling a ready-fitted house because of any potential tax expenses.

Share Transactions

Minimising your stamp duty liabilities on share transactions is virtually impossible. All such transactions are taxed at a flat rate of 0.5%, with no minimum threshold. However, you may find it easier to buy shares electronically. If you use the CREST system, the duty is automatically paid, meaning that you save time (and, potentially, money) that would have been spent on self assessment. For more information, read our article Stamp Duty on Shares.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • MH829567
    Re: What Does Road Tax Pay For?
    Road Tax doesn't pay for anything cos it don't exist. Vehicle Excise Duty or CAR tax pays for the environmental effects of the…
    9 July 2019
  • Sandra
    Re: Payment of Pensions
    I want my pension to be paid weekly not monthly can this be changed ?
    5 July 2019
  • Sandra
    Re: Payment of Pensions
    I want my pension to change from monthly to weekly can thus happen?
    5 July 2019
  • vic
    Re: How Will My Second Job Be Taxed?
    my son is at uni and works on a sat for 8 hrs, he has just started a full time summer job until uni goes back and has been…
    4 July 2019
  • Jane
    Re: How Will My Second Job Be Taxed?
    Hi, I've recently been offered 2 part time positions (very similar roles) and am wondering if I could accept both offers? In…
    4 July 2019
  • Stace
    Re: What is My Tax Code?
    I have two jobs but one job I only do about 20 hours a month but do more with the other one... I have different tax codes with both jobs?…
    28 June 2019
  • Nat
    Re: How Will My Second Job Be Taxed?
    Hi I have recently left my job to do some ad hoc work on a self employed basis. Working 1-2 days a week, work isn’t always…
    5 June 2019
  • Sharon
    Re: Claiming Tax Relief on Mileage
    I’ve just started working for a care firm who pays 30p a mile how do I claim up to 45p what do I need to do to claim the 15p
    2 June 2019
  • Macspod
    Re: Should I be Paid Mileage Allowance?
    Hi, My employer is applying rules that do not match the HMRC documents regarding what journeys should be paid mileage…
    31 May 2019
  • Bex
    Re: How Will My Second Job Be Taxed?
    I work 24 hrs per week at £11ph If I get another job working 16hrs per month at £12ph What will my tax be on the second…
    30 May 2019