The Stamp Duty Loop Hole:
How Savvy Buyers Avoid Paying the Additional Property Tax
The 3% additional property stamp duty surcharge hits investors and upsizers alike — but it isn’t unavoidable. Here’s how semi-commercial and limited-company strategies can help reduce or legally eliminate it while still building your property portfolio.
The 3% Surcharge Explained
Anyone purchasing a second property in England; whether a buy-to-let, holiday home, or investment flat — faces a 3% stamp duty surcharge on top of standard SDLT rates.
For many landlords and aspiring movers, this adds tens of thousands to upfront costs and makes upgrading or expanding portfolios more challenging.
However, not all property types are subject to this surcharge, and certain ownership structures can change how the transaction is classified for tax purposes.
Option 1: Semi-Commercial and Commercial Properties
Why They’re Different
The 3% additional-property surcharge applies only to residential dwellings.
Properties classed as commercial or mixed-use fall under a completely different set of SDLT rates and crucially, the 3% surcharge does not apply.
Mixed-use (or semi-commercial) means a property with both commercial and residential elements, such as:
A shop with flats above
An office with a residential conversion
Ground-floor commercial units with residential upper floors
These transactions are taxed under commercial stamp duty rates, which are typically lower — and no additional 3% is charged, even if you already own other properties.
Example:
A £500,000 mixed-use property could attract just £14,500 of SDLT under commercial rules — instead of £30,000+ under the residential surcharge system.
Investor Advantage
Lower entry costs compared to pure residential investments
Broader lending options, including semi-commercial mortgages
Dual-income potential — rental from both the business tenant and residential unit(s)
| Property Value | Mixed-Use / Non-Residential SDLT Rate | Residential SDLT Rate (Main Home, Standard Rates) |
|---|---|---|
| Up to £150,000 | 0% | 0% (on the first £125,000) |
| £150,001 to £250,000 | 2% | 2% (on the slice from £125,001 to £250,000) |
| Above £250,000 | 5% | Up to 12% (and potentially higher with surcharges) |
Option 2: Upsizing Without the Surcharge — The Limited-Company “Let-to-Buy” Route
Many homeowners looking to move up the ladder hit a wall when trying to buy their next home while keeping their current property as a rental. If they buy their new home before selling the old one, HMRC sees it as a second property therefore triggering the 3% surcharge.
But there’s a smart, compliant way around this.
The Strategy
Instead of keeping your old home personally, you can sell it to your own limited company (SPV), turning it into a buy-to-let property.
Then, you can purchase your new residential home in your personal name as a replacement main residence, without triggering the surcharge.
Here’s how it works:
Set up a Special Purpose Vehicle (SPV) for property letting.
Sell your current home to that company at market value.
The SPV takes a buy-to-let mortgage on the property (yes, lenders accept this with correct structure).
You then buy your new residential property as your main home, exempt from the additional 3%.
Benefits
Legally separates investment and personal ownership.
Creates a tax-efficient vehicle for future property growth.
Retains your old home as a rental asset.
Avoids the “second property” surcharge when buying your new main home.
Important Considerations
The transaction between you and your company must be at market value.
The company may need to pay SDLT on the purchase, but it won’t trigger your 3% surcharge when you buy your next home.
Always consult a tax adviser for corporation tax, capital-gains, and connected-party implications.
If you have any questions, please feel free to contact us.
Option 3: Pairing the Two – Smart Portfolio Expansion
Some investors combine both strategies:
Acquire semi-commercial properties for diversification and tax efficiency.
Use a limited-company let-to-buy route to release capital from their main residence.
This dual approach reduces stamp duty exposure on entry and opens future flexibility to refinance, reinvest, or restructure with minimal transaction drag.
Our Take
Stamp duty planning isn’t about loopholes, it’s about using the system intelligently and compliantly. Understanding which transactions fall outside the surcharge, and when to use corporate structures, can save serious capital while preserving long-term flexibility.
With careful structuring, the money saved can fund your next deposit, improve liquidity, or add a new property to your portfolio.
Next Steps
Thinking about upscaling or adding semi-commercial assets to your portfolio?
👉 Book a free portfolio review with our team — we’ll help you assess options for semi-commercial investing, SPV structuring, and let-to-buy lending routes tailored to your goals.
Manchester Independent Mortgages Ltd is authorised and regulated by the Financial Conduct Authority (FCA 431647). The information above is for guidance only and does not constitute personal or tax advice. Your home may be repossessed if you do not keep up repayments on your mortgage. Tax treatment depends on individual circumstances and may be subject to change.