Stamp duty land tax (SDLT) can be a significant cost in a property transaction. This is particularly the case where more than one residential property is being acquired, or residential property is being acquired and an existing residential property is already owned.
Different reliefs may be available which can reduce the SDLT liability in such a scenario.
SDLT on residential property
Since April 2016, an additional rate of SDLT of 3% is applied where individuals and companies purchase an ‘additional residential property’ and the individual is not relying on replacing a main residence.
A company will incur the additional rate even when an existing residential property is not already owned by the company.
Mixed use
However, the additional rate does not apply where mixed use property is being acquired. Mixed use property would include, for example, two residential properties and 50 acres of land that has been farmed by the vendor and will continue to be farmed by the purchaser on acquisition. In such a scenario, the non-residential rate of SDLT would apply as follows.
| Band |
SDLT rates |
| £0 - £150,000 |
0% |
| £150,000 - £250,000 |
2% |
| £250,000+ |
5% |
Where available, mixed use relief will usually result in the lowest SDLT liability.
Multiple dwellings relief
If two or more dwellings are being acquired in a single linked transaction, what is known as multiple dwellings relief can be claimed. Depending on the particular circumstances this may reduce the liability to a level lower than calculating SDLT on the actual total value of each dwelling.
The relief works by dividing the total amount to be paid for the properties by the number of dwellings, working out the SDLT due on each property on this figure and then multiplying this amount of tax by the number of dwellings.
SDLT is calculated on any land being acquired and added to the SDLT due on the dwellings.
SDLT options for transactions involving six or more dwellings
Where six or more dwellings are acquired in a single transaction the purchaser can choose to apply:
- the non-residential rate of SDLT; or
- claim multiple dwellings relief and pay the higher rates.
A property investor may decide to buy more than one property in a single transaction if the value of one of the properties is comparatively low to the other one, in order to average out and pay the lower rate of tax on the total consideration.
Going forward
An SDLT return must be filed and payment made within 14 days of the effective date of transaction. The above hopefully illustrates that potential different reliefs need to be considered in calculating the SDLT due on an acquisition to ensure that the liability is reduced to a minimum. Multiple dwellings relief needs to be formally claimed in the SDLT return, otherwise standard rates will be applied.
If you have any questions regarding SDLT then please contact Nick Haines or Peter Griffiths or your usual contact in the Farms and Estates team.