Escape The 5% Stamp Duty Tax!
It is rare that I ever go over the £1m benchmark on individual property investments, but the arrival of the 5% stamp duty fee has really got me thinking about what I am going to do in the future should I ever want to go down this road.
Not only is this increase going to cost property investors at least an extra £10,000 in taxes (on top of the existing £40,000), but the Land Registry is already predicting that this new stamp duty is going to affect 10,000-15,000 more buyers every year.
Now as you already know from reading this blog, I am not one to give up easily which is why over the last few weeks I have been researching into various methods to take the edge of this stamp duty fee. And luckily I think I have found a solution…
I was reading an article in the Telegraph, which revealed that many property developers are currently finding legal loopholes to help property owners, such as you and me, to save thousands of pounds on our property investments. And they are pretty nifty loopholes too:
- Special Purpose Vehicles (SPV) – here property developers are proposing to set up companies or trusts where your potential property development becomes its sole asset. By doing so, when homeowners come to buy – instead of invest traditionally – they will instead be able to buy shares in the company that are only liable to a tax rate of 0.5%.
NOTE: Not only are the Treasury now looking for methods to close this loophole, but it is important to remember that should your property rise in value after it has been put into a SPV, you will be liable to capital gains tax.
- Buy land – another clever alternative that property developers are offering to homeowners is the opportunity to buy land and build their own homes. By doing so, you will only have to pay tax on the land, which if it is below the £250,000 threshold will mean you don’t have to pay anything.
Some property developers are even going as far as to let property owners invest in their land, before entering into a contract with them to build their property. Under this scheme, property owners will still be classed as self-builders and will be taxed as such.
Of course for each of these schemes, you will have to heavily rely on a property developer to help you achieve it. But still, with proper research you can ensure that you work alongside a quality property developer who will help you to take full advantage of these loopholes.
They definitely are inventive! And for those of you who haven’t got an extra £10,000 spare to pay in stamp duties, these loopholes will be a blessing in disguise.
Wendy xx
