Bridging Loan for Stamp Duty: Guide for Buyers and Brokers

September 17, 2025

Bridging Loan for Stamp Duty: Guide for Buyers and Brokers

Planning to buy a home before selling your current one? Or investing in a new development in Bournemouth? You might need a bridging loan. But here’s something many forget: bridging loans can directly affect your Stamp Duty Land Tax (SDLT) bill. In this blog, we’ll explain what bridging loans are, how they impact your stamp duty, and how to manage the risks. We’ll also show you how Kara Capital can help you get the right finance solution.

What Is a Bridging Loan and How Does It Work?

A bridging loan is a short-term loan. People use it when they need money quickly before long-term finance is available. It “bridges” the gap between buying and selling.

For example, if you want to buy a property in Bournemouth but haven’t sold your current home yet, you can take a bridging loan to cover the purchase. Once you sell the old property, you pay off the loan.

Bridging loans are fast and flexible. They work well for:

Chain break scenarios
Property auctions
Buy-to-let purchases
Property refurbishments
Buying before selling
Company purchases

But there’s a catch. If you own two homes, even temporarily, you may have to pay extra stamp duty.

Understanding Stamp Duty Land Tax (SDLT)

Stamp Duty is a tax on property purchases in England and Northern Ireland. The rate depends on the price, property type, and buyer’s situation.

The estimated basic rates (as of now):

0% up to £250,000
5% from £250,001 to £925,000
10% from £925,001 to £1.5 million
12% above £1.5 million

But if you buy a second property, there’s an extra 3% surcharge.

This means if you buy before you sell, and already own a home, you pay more.

Bridging loans often create this situation.

How Bridging Loans Affect Your Stamp Duty Bill

If you use a bridging loan to buy a new home while still owning another, HMRC sees it as a second property. You’ll pay the 3% surcharge, even if you plan to sell your old home soon.

Estimated Example:

You buy a £500,000 home using a bridging loan.
You already own another home.
Stamp Duty without surcharge: approx. £12,500
Stamp Duty with surcharge: approx. £27,500

That’s a difference of around £15,000.

The good news? You may be able to claim a refund.

How to Get a Stamp Duty Refund

If you sell your old property within 36 months of buying the new one, you can apply for a refund. HMRC will repay the 3% surcharge.

But it’s not automatic. You need to:

Complete the sale of your previous home
Apply for the refund within 12 months of the sale

Refunds take time and paperwork. That’s where working with experts helps.

Kara Capital in Bournemouth assists clients in handling the stamp duty refund process.

How Kara Capital Helps Bridging Loan Clients

Kara Capital is based in Bournemouth and helps buyers, investors, and developers secure smart property finance.

Here’s how they can help you:

Find the Right Bridging Loan
- Choose from many lenders
- Match the right deal to your needs
- Fast approval and flexible terms
Plan Around Stamp Duty
- Expert SDLT guidance
- Avoid overpaying
- Maximise your refund opportunities
Build an Exit Strategy
- Plan how to repay the bridging loan
- Help with long-term mortgages
- Smooth transition from loan to ownership
Support Developers
- Finance for refurbishment and ground-up builds
- Advice on staging purchases to reduce tax

Case Study: Bournemouth Buyer Avoids Extra Costs

Sarah, a Bournemouth homeowner, wanted to upgrade her home. She found a perfect property, but her old house hadn’t sold yet.

Using a bridging loan arranged by Kara Capital, she moved quickly. She paid the higher stamp duty initially but sold her old home within 5 months.

Kara Capital helped her file the refund claim. She got back an estimated £10,000 in 8 weeks.

This is a common situation. Without planning, buyers can overpay and miss refund deadlines.

More Risks and How to Manage Them

Bridging loans can help, but only with proper planning. Here are common risks:

Timing Problems: Delayed sales can cause stress and extra interest.
Missed Refunds: If you forget to claim your SDLT refund, you lose money.
Cash Flow Pressure: You must pay interest monthly or roll it into the loan.
Legal Pitfalls: Poor structuring can trigger higher taxes.

How to reduce these risks:

Work with an FCA-regulated broker
Create a clear exit plan before applying
Budget for tax and legal fees
Talk to a tax advisor before you commit

When Should You Consider a Bridging Loan for Stamp Duty?

Here are some common use cases where bridging loans make sense:

Buying at Auction: Completion is needed fast, bridging helps you secure the deal.
Buying Before Selling: Avoid losing your dream home while waiting for a buyer.
Renovation Projects: Fund works on a fixer-upper, refinance after improving value.
Company Purchases: Companies buying property often need short-term finance.

Each case can affect stamp duty differently. That’s why early advice matters.

Kara Capital helps you plan the finance, and the tax.

Bridging Loans vs Other Financing Options

Let’s compare bridging finance with other methods:

Financing Type	Speed	Flexibility	SDLT Impact
Bridging Loan	Fast	High	Triggers second home surcharge
Traditional Mortgage	Slow	Low	Lower SDLT if primary residence
Personal Loan	Moderate	Limited	Uncommon for property
Cash	Fast	Full	Normal SDLT rules

Bridging wins on speed and flexibility, but stamp duty must be managed carefully.

Final Thoughts: Plan Smart with Kara Capital

Bridging loans can unlock property opportunities. But they also affect your stamp duty in ways many overlook.

With expert help from Kara Capital in Bournemouth, you can:

Find the right loan
Avoid overpaying tax
Claim your refund on time
Stay in control of your budget

Don’t let tax confusion derail your purchase. Plan smart, act fast, and protect your money.

Contact Kara Capital today for advice on bridging loans, stamp duty, and your next big property move.

Bridging Loan for Stamp Duty: Guide for Buyers and Brokers