Can you avoid paying stamp duty on off-plan property?

Should you flip off-plan property?

As part of its desperate attempts to raise as much tax revenue as possible, in 2016 the government introduced the additional property surcharge for stamp duty land tax (SDLT or ‘stamp duty’). It is raising more than £2 billion each year. That’s money mostly out of the pockets of property investors.

As you can imagine, this extra stamp duty is a drain on property investment profits. However, if you invest in off-plan property, you may be able to avoid stamp duty. In this article, you’ll learn how this is possible, and how you should plan to take advantage of off-plan property’s unique tax status.

What is the higher rate of stamp duty for additional properties?

If you are buying a residential property and the purchase means that you will own more than one property, you now must pay a surcharge of 3% on top of the standard SDLT rates.

The amount of stamp duty payable depends upon the price of the residential property you are buying. There’s a sliding scale that increases the tax rates as a property’s price rises. The residential stamp duty rates start at 0% for properties under £125,000, rising to 12% payable on the price paid above £1.5 million.

Then there’s the additional property surcharge of 3% to consider. This is charged on the entire property price, unless you buy the property for less than £40,000, in which case no stamp duty is due.

This all adds up to a potentially hefty tax bill for the property investor. For example, if you pay £325,000 for your investment property, you will owe £16,000 in stamp duty. This must be paid within 30 days of completion, otherwise you may have to pay penalties and interest in addition to the stamp duty. Thus, we recommend that your solicitor should file your SDLT return for you and pay tax on your behalf on the day of completion.

How can you easily calculate how much stamp duty you will owe?

Rather than mess around with calculators, SDLT tables, and pen and paper, there’s a neat SDLT calculator on the government’s tax website. Simply answer a few questions about the property, and you will generate a 100% accurate stamp duty calculation for your property investment. It takes about 30 seconds to do, and you get a complete breakdown of the calculation, too.

Does paying stamp duty alter the potential of property investment?

If you are investing for the long term, the answer is not really. You should always factor in the stamp duty amount in your calculations, and ensure that you have the cash available to pay it. Over a period of time, you should be able to recoup the stamp duty through rental income.

However, if you are investing to flip the property (sell it shortly after you have bought it), then it could become a problem. Imagine buying a £325,000 property and selling it for £350,000. Your profit isn’t £25,000, but instead only £9,000, because you had to pay £16,000 in stamp duty.

Investors in off-plan property could avoid this stamp duty payment, and pocket the entire capital gain.

Off-plan property – the stamp duty loophole

Stamp duty is charged on a property when it completes. If you sell before completion, you don’t pay the stamp duty – the owner at completion does.

Let’s say you purchase an off-plan property priced at £325,000. You pay a 10% deposit. In two years, just before completion, you have the property valued and find it is now worth £370,000. Instead of completing and paying your £16,000 stamp duty (remember, it’s payable of the purchase price), you decide to sell the contract to another buyer. You pocket the profit of £45,000, and your buyer (who then must complete when the property is finished) must pay the stamp duty.

It sounds fantastic, doesn’t it?

A warning about flipping off-plan property

Flipping off-plan property is a risky way to invest. While it is possible to make incredible capital gains with this strategy, it can also blow up in your face. For example:

  • If property prices fall between your purchase and nearing completion
  • If lots of property investors have the same strategy and all want to sell before completion, there could be a glut of sales in a development, depressing prices
  • You can’t find a buyer

If you’re relaxed with these risks, then before you enter into an agreement to buy off-plan, you should check that the off-plan property contract is ‘assignable’. In other words, are you allowed to sell the property before it completes? If it isn’t, you won’t be able to flip the property.

Here are some other precautions you should take, if your aim is to flip the property before completion:

Do your due diligence

Make sure that you are buying in the best places to invest in property UK. Do your property research, and always invest where the property fundamentals – shops, schools, transport links, major employers and major investment – are strongest. (Check out Birmingham and Manchester, two cities that our research says should produce incredible capital gains and rental returns for years to come.)

Makes sure you use the strategies that the best property investors use to reduce:

Always have a plan B

Your plan is to sell the off-plan property contract before completion, bank a huge profit, and take a well-deserved around-the-world trip. But what if things don’t work out as planned? What if property prices fall, or a raft of sellers temporarily depresses the price?

It may be better to complete, and act more like a long-term investor. Rent the property out, pocket the rental income, and wait until the market is more conducive to a sale. Always be prepared to do this. Get your finances in order, your mortgage agreed, and investment property management in place. And make sure you have the funds to pay the stamp duty when it is due.

Remember that no stamp duty doesn’t mean no tax liability

If your flipping strategy works out, you will have avoided paying stamp duty. But this doesn’t mean you won’t have some tax to pay.

You may have capital gains tax to pay, depending upon your gain and how much of your personal capital gains tax allowance you have used in the tax year when you sell.

If you have purchased as a limited company, you may have corporation tax to pay on the profit.

Is flipping a good property investment strategy?

Flipping has made a lot of investors a lot of money. But it has also lost a lot of investors a lot of money. The dynamics of a property market can change temporarily (sometimes, more permanently) very quickly. If prices are depressed when you want to sell, you could make a substantial loss.

We recommend that you invest in property for its long-term potential. It’s not a get-rich-quick scheme. But if you do intend to buy off-plan property to flip, then always be prepared with a plan B – to buy the property on completion, pay the stamp duty, and act like a long-term property investor. If you don’t take these basic precautions, your flipping strategy could flip your finances over a cliff edge.

To find out where the best off-plan property investment opportunities exist today, and how you can access them with fantastic discounts to market values, contact one of the Gladfish team today on +44 207 923 6100.

Live with passion,

Brett Alegre-Wood

Brett Alegre-Wood
November 14, 2017


Our Capital Growth Picks - Regeneration Hotspots & Developments

We Give You First Access & Negotiate Discounts on london and UK Property Development in the latest Regeneration Hotspots.






Our Cash Flow Picks - High Yielding BTL, HMO & Assisted Living

Access Fully Managed High Yielding Property In UK Minor Cities.










Current Developments

View Available Property

Related Property Articles & News

Invest in a Thriving Future at The Green Quarter, Southall

Invest in a Thriving Future at The Green Quarter, Southall

Simplifying Buy to Let Investment UK: Navigating House Price Predictions

Simplifying Buy to Let Investment UK: Navigating House Price Predictions

One Great Property Idea

How Property Investors with Little Time Can Invest in New Build and Off Plan Property using a Regeneration Strategy and Where Exactly to Invest.


530pm London GMT


1230pm London GMT

Property Investment... Effortlessly Done For You!