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Stamp Duty Land Tax Planning Guide

This article was published a while ago.
The latest stamp duty information can be found in our guide:
How to Save Property Tax

In a Buyer's Market we need all the help we can get when it comes to selling a property. So here's a little known strategy that will help you sell a property. The concept it simple: offer a cash incentive to a potential buyer. That is, should a buyer ask for a price reduction, you can instead offer a cash incentive as a way of getting a sale. And you can do this without any financial loss.

Let's look at an example to explain this further:

Example. Your house is worth about £350,000 based on estate agent valuations and comparable prices. But you are keen to sell so you advertise the house at a competitive price at £340,000. A buyer shows interest and offers £330,000. You cannot accept this price, and you ascertain that the buyer would have to get a mortgage. So you offer the buyer a deal based on a selling price of £350,000 plus a £10,000 cash incentive. This means you get a net £340,000 for your house.

The Buyer gets a mortgage based on £350,000 rather than £340,000, and gets £10,000 in cash which can be used to pay for stamp duty, legal fees, and anything else. Hence, you are helping the buyer to finance the stamp duty and other costs.

In fact, a cash incentive can be built into almost any property transaction, by either the buyer or the seller, to their mutual benefit. The book How to Avoid Stamp Duty shows exactly how to structure such deals so that they are legal, and attractive to either a buyer or a seller.

A £5,000 or £10,000 cash incentive can be a very powerful deal-clincher, particularly if the buyer has limited financial resources for the mortgage deposit, legal fees, stamp duty, and other purchase costs.

Strategies that include cash incentives will become even more useful in the future because the Chancellor (in his recent pre-budget announcement) has given a very strong indication that the rates of stamp duty will not be changed in the next Budget. This, combined with a depressed property market, means that anybody selling property will need to use every trick in the book to be successful.