Buying a Derelict Property in 2025? Here's What You Need to Know About Avoiding SDLT 

If you're planning to buy property in England or Northern Ireland, Stamp Duty Land Tax (SDLT) is likely on your radar—and your budget. For many, it’s a significant extra cost, especially with property prices remaining high in 2025. But what if the property you’re buying is in such poor condition that it can’t be lived in? Can that help you reduce—or even avoid—paying SDLT? 

The answer is: possibly, but only in very specific circumstances. While there are legal ways to pay lower stamp duty on truly uninhabitable homes, the rules are strict—and HMRC is paying close attention. 

What Is SDLT and When Do You Pay It? 

SDLT is a tax payable to HMRC when you purchase property or land above a certain value. As of July 2025, the thresholds are: 

• £250,000 for residential property 

• £150,000 for non-residential or mixed-use property 

If the property is a second home or buy-to-let, you’ll also pay a 3% surcharge on top of the standard residential rate. For example, buying a £500,000 home could easily mean a stamp duty bill of £12,500—more with the surcharge. 

But here's the key: if a property is deemed non-residential at the time of purchase—often the case with severely derelict properties—then lower non-residential rates apply. In some cases, this could lead to substantial savings. 

What Counts as ‘Uninhabitable’? 

Not every run-down home qualifies for reduced SDLT. According to HMRC, a property is considered residential if it is “suitable for use as a dwelling” at the time of purchase. The crucial question is whether someone could reasonably live there without major repairs. 

It’s not enough for the home to be dated or unloved. The property must have serious defects, such as: 

• No working kitchen or bathroom 

• Dangerous or faulty electrics 

• Structural instability 

• Severe damp, mould, or water ingress 

• Asbestos contamination 

• No heating or plumbing 

Tribunal cases have shown that properties with collapsed floors, exposed wiring, or missing roofs have qualified as uninhabitable. In such cases, buyers may be able to legally claim non-residential SDLT rates—but strong evidence is essential. 

Tribunal Rulings: When It Works and When It Doesn’t 

Recent rulings show just how closely HMRC is watching. 

• In Higgins v HMRC (2023), the buyer successfully argued that the house lacked plumbing and was severely damp. The tribunal agreed it was uninhabitable, and the buyer saved over £7,000 in SDLT. 

• But in Riverside Properties Ltd v HMRC (2024), a flat with no hot water and a faulty boiler didn’t qualify. The tribunal ruled these were fixable issues, and the buyer had to pay full SDLT plus penalties. 

The key takeaway: you must prove that the property was unfit to live in at the time of purchase. Without strong documentation, you’re unlikely to succeed—and could face fines. 

How to Prove a Property Is Uninhabitable 

To claim non-residential SDLT, you’ll need detailed, time-stamped evidence. The best approach includes: 

• A professional surveyor’s report outlining the issues 

• Photographs of the condition on completion day 

• Quotes from contractors or official notices (if applicable) 

• Any environmental or structural assessments 

The more independent and credible your evidence, the stronger your claim will be if challenged. 

How Much Could You Save? 

The savings can be significant. For example, on a £400,000 property: 

• Residential SDLT: £7,500 

• Non-residential SDLT: £4,500 

• Potential saving: £3,000+ 

For second homes, the savings can be even greater because you may also avoid the 3% surcharge. 

Note: mixed-use properties (like a shop with a flat above, or land with outbuildings) also qualify for non-residential rates—another avenue worth exploring. 

A Word of Caution: Don’t Bend the Rules 

Claiming a property is uninhabitable when it’s not is a risky move. If HMRC finds your claim to be unfounded, you could face: 

• Backdated SDLT at residential rates 

• Interest on unpaid tax 

• Penalties up to 100% of the tax avoided 

With HMRC now using AI tools to flag suspiciousSDLT returns, it’s more important than ever to be honest—and thorough. If you're unsure, consult a solicitor or tax adviser before submitting your return.  

How to File for the Lower SDLT Rate 

If you’re confident that the property qualifies as uninhabitable, you can: 

• File your SDLT return using non-residential rates from the start 

• Attach or retain the supporting evidence 

• Alternatively, some buyers choose to pay the full amount and then apply for a reclaim within 12 months 

Either method works, but the upfront approach is cleaner, especially if your documentation is solid. 

Conclusion  

Buying an uninhabitable property in 2025 can be a smart move—both for the price and the potential tax savings. But the SDLT rules are strict, and HMRC is keeping a close watch. 

If you’ve found a genuine wreck and have the paperwork to back it up, the stamp duty savings can be substantial. But if you’re stretching the truth, you could end up paying far more than you bargained for. 

When in doubt, seek expert advice before filing. In property tax, as in renovations, cutting corners rarely pays off.