The definition of an uninhabitable property in the UK is vague, due to there being many rules set out by HMRC regarding stamp duty land tax. Generally, what deems a property uninhabitable by HMRC is if it lacks basic living functionalities, such as not having a kitchen or bathroom, or other factors like running water and heating.

However, many without even realising may be entitled to a stamp duty refund or discount if their property qualifies as being uninhabitable. Read more to find out how stamp duty works for uninhabitable properties. 

 

What Makes a Property Uninhabitable in the UK? 

It is important to not confuse uninhabitable properties with those which may require some basic TLC, such as redecorating or renovating to make it look fresher, as these are still in liveable condition. Consequently, making such properties ones where you will be required to pay the right stamp duty land tax. 

Below, we have set out some examples of what might make a property uninhabitable under HMRC’s rules and regulations: 

  • Presence of asbestos in the building 
  • Non-standard roofs 
  • No running water
  • Damp or mould that could cause health risks
  • Is not weatherproof e.g. windproof 
  • Does not meet building regulations e.g. suitable railings for stairs 
  • Presence of lead (in water pipes or paints) 

 

Do I Pay Stamp Duty On an Uninhabitable Property? 

If you are already a homeowner and are buying a second property, then you are required to pay an additional 3% surcharge on any second property or piece of land purchased in the UK. However, if you buy a property which is considered no longer habitable as a dwelling, then exemptions may apply. 

HMRC sets out a difference between a derelict property and one which requires some repairs. As described above, it is important to distinguish between the two – as an uninhabitable property is one which is not fit for everyday living. 

So, the answer is no – you do not pay stamp duty on an uninhabitable property. If you buy a property which does not include basic amenities, such as heating or water, or perhaps needs asbestos removal then it is not considered fit for residential purposes. In such instances, you will not be required to pay the higher stamp duty rates beyond the 3% additional tax for second homebuyers

 

Can I Get a Mortgage On a Derelict Property? 

The recent case of P N Bewley Ltd v Revenue and Customs Commissioners (2019) showcased that the higher rate of stamp duty tax may not be payable if the property, at the time of purchase, was deemed uninhabitable. 

Now a popular case referred to, Mr Bewley’s legal battle highlighted that uninhabitable properties can be viable options for those wanting to purchase cheaper properties, at a lower tax rate. Yet, this still comes with further complications and guidelines to follow. 

Many now consider buying uninhabitable properties, as they are cheaper in price and stamp duty tax, making them viable renovation projects and investment properties. However, this may come with additional complications, such as if you are wanting to get a mortgage

As it is with other properties, taking out a mortgage requires lots of background and affordability checks before a lender will provide you with a mortgage. However, for uninhabitable properties, many will not consider applicants with derelict dwellings at all. Fear not – there still are lenders that consider uninhabitable properties, it may just require further research and opting for the right company. 

 

Can I Get a Stamp Duty Refund for an Uninhabitable Property? 

Many people overpay HMRC in stamp duty, often due to miscalculations. In such instances, you will then be entitled to what is called a stamp duty refund. A stamp duty refund, or rebate, means that you can reclaim any overpayments from HMRC and receive this in your nominated bank account. 

If you purchased an uninhabitable property, you may also be entitled to a stamp duty refund. The process to apply for a stamp duty rebate is straightforward, and can be done by yourself, through a solicitor or even an online mortgage rebate company. Whichever method you opt for, you are likely entitled to money.