No Stamp Duty for Clever Probate Purchases
Stamp Duty Changes and Opportunities for Property Traders
As of April 1st, the government revised Stamp Duty thresholds, resulting in higher taxes for homebuyers. For property traders—businesses focused on buying and selling real estate—this has introduced substantial additional costs. Despite this, there are still legitimate ways for traders to minimize or even eliminate Stamp Duty charges.
Stamp Duty Exemptions for Probate Properties
One notable exception involves purchasing probate properties. Under certain conditions, property traders may be able to acquire these without paying any Stamp Duty.
To qualify for this exemption, the following conditions must be met:
- The property must be purchased from a probate company or the estate’s executors and the transaction must be made under the name of a qualifying property trade business. According to SDLTM21010, a ‘property trader’ refers to a company, LLP, or partnership composed entirely of companies or LLPs—individuals and sole traders do not qualify.
- The deceased must have lived in the property as their main residence for at least two years leading up to their death.
- The land, including the property itself, must not exceed 0.5 hectares.
If all these criteria are satisfied, traders can apply for full Stamp Duty relief by entering relief code 28 when submitting form SDLT1 to HMRC.
Partial Relief if Land Size Exceeds Limits
If the land exceeds the 0.5-hectare limit but the other conditions are met, partial relief is still an option. In such cases, the Stamp Duty will be calculated based only on the portion of the land that exceeds the permitted area.
Maintaining Relief Post-Purchase
Even after securing full or partial relief, traders must adhere to specific rules to maintain their exemption. If these are violated, the relief may be revoked and the tax imposed.
One important condition is the renovation spending cap: you may only invest up to £10,000 or 5% of the purchase price (whichever is greater), with a maximum of £20,000. However, costs related to essential safety improvements, such as fixing faulty wiring, do not count toward this cap.
Additionally, the relief can be lost if the property is rented out, licensed, or occupied by the trader, employees, or related individuals.
Why Probate Properties Are Worth Considering
Probate properties can offer valuable opportunities for property traders. “They often sell below market value, particularly at auctions, due to the need for upgrades and the executors’ desire for a quick sale,” noted Oliver Prior, National Commercial Director at Auction House. “With the right improvements, these properties can be resold for a substantial profit.
“However, Stamp Duty can significantly eat into those profits, so it’s essential that traders take advantage of any applicable exemptions.”
