How Bridging Loans Could Affect Your Client’s Stamp Duty Bill

Buyers using bridging loans to purchase residential or investment property may find themselves paying more in Stamp Duty Land Tax (SDLT) this year, following changes to the thresholds in April. While bridging finance can help move deals along quickly, it’s not without tax implications, and understanding those could make all the difference when structuring transactions for clients.

Stamp Duty is payable on completion of a property purchase, regardless of whether the funding is long-term or temporary. That means clients using a bridging loan to secure a property before selling their existing one, or while finalising development finance, will still face the same upfront tax bill as any other buyer.

What is Stamp Duty and Who Pays It?

Stamp Duty Land Tax (SDLT) is a tax paid on property purchases in England and Northern Ireland. The amount depends on the property’s price and the buyer’s circumstances, for example, whether they are a first-time buyer, purchasing an additional property, or buying through a company.

The New SDLT Thresholds Apply, including:

● £250,000 nil-rate threshold for all buyers

● First-time buyer relief for purchases up to £425,000

● 3% surcharge on additional properties (buy to let or second homes)

Why This Matters for Brokers

For brokers, understanding how bridging loans affect Stamp Duty Land Tax (SDLT) is essential when structuring property finance deals. This knowledge becomes even more critical when working with clients navigating chain-break scenarios, downsizers looking to release equity, investors purchasing multiple units, or SMEs and limited companies securing commercial or residential property.

Bridging loans are often chosen for their speed and flexibility, helping clients complete purchases quickly or take advantage of time-sensitive opportunities. However, it is important to remember that SDLT remains payable on completion, regardless of whether the bridging loan is intended as a short-term solution. This can catch clients off guard if not properly planned for, especially in cases where the transaction temporarily results in multiple property ownership or where company purchases incur the full rate without exemptions.

By understanding the interaction between bridging finance and SDLT, brokers can help clients prepare for the associated tax obligations and avoid unexpected costs.

When Bridging Loans Influence Stamp Duty Liability

Bridging loans do not directly alter the SDLT calculation. However, they can affect when and how SDLT becomes payable, particularly in more complex transactions.

Key Scenarios to Consider

1. Clients Purchasing Additional Properties

Clients using bridging loans to acquire buy-to-let or second homes will still pay the standard SDLT plus the 3% surcharge. This applies whether or not the loan is repaid quickly.

2. Limited Companies and SMEs

If your client is purchasing through a limited company, SDLT applies at the full rate regardless of whether it’s a first property. Certain reliefs may apply depending on the structure and use of the property — for example:

● Multiple Dwellings Relief (MDR)

● Build to Rent relief

● Charity or public body exemptions

3. Bridging as a Strategy to Buy Before Selling

For homeowners downsizing or upsizing using bridging finance to break a chain, they could temporarily own two properties. This may trigger the 3% surcharge. However, a refund may be available if their original home is sold within 36 months.

Impact on Affordability and Profitability

While bridging loans offer speed and flexibility, often allowing buyers to move ahead with a purchase before selling another property or finalising long-term finance, they also add to the upfront cost of acquisition once Stamp Duty Land Tax (SDLT) is taken into account. For property investors and developers working to tight margins, this can make a real dent in overall profitability.

Even when the intention is to refinance quickly or sell another asset to repay the bridging loan, SDLT is still payable in full at the point of completion. That means if the purchase involves an additional property or is made through a limited company, the higher rates and surcharges will apply straight away. Without careful planning, these tax costs can easily be overlooked, particularly where multiple properties are involved or a project is being acquired in phases.

Factoring SDLT into the financial modelling from the outset is essential. If not, the extra tax burden could reduce net returns or make an otherwise viable deal less attractive, especially in cases where clients are relying on capital gains, rental yield or future refinancing to drive value.

This Makes it Essential to:

● Account for SDLT early in affordability checks

● Discuss the impact with the client’s accountant or tax adviser

● Recommend a strong exit strategy to avoid delays that might affect eligibility for refunds

Potential Checklist for Brokers Advising on SDLT and Bridging Loans

● Check if the purchase will trigger the 3% surcharge

● Confirm whether the buyer is using a company or personal funds

● Assess eligibility for MDR or BTR reliefs

● Plan for SDLT to be paid within 14 days of completion

● Explore refund routes for chain-break scenarios

● Recommend clients take independent tax advice

A Joined-up Approach

The relationship between bridging loans and Stamp Duty is nuanced. Brokers who take a proactive approach to SDLT can protect their client’s investment and avoid costly surprises down the line.

At Alternative Bridging Corporation, we work with brokers every step of the way to ensure clarity on all costs, including SDLT. Whether your client is buying their next home, expanding their portfolio, or acting on a business opportunity, we offer bridging finance with transparency and support throughout.

Explore our full range of bridging loan solutions or get in touch to discuss how we can support your clients with their next purchase.