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Stamp Duty Land Tax - Reliefs and Mitigation

Most people are by now aware that in March 2016 the government overhauled the Stamp Duty Land Tax (SDLT) rates, ostensibly to “reform” and “make fairer” the process for “hard working families” – that oft used phrase beloved of politicians, but in fact resulting in significant increases in the amount of tax paid on properties over £250,000, on second homes and on properties bought in the name of trustees or companies. 

The actual rates can be found on the Moore Blatch app, which you can download straight to your phone using the links below. But suffice to say that for anyone looking to invest in buy to let property, or purchase that new country house, then the costs have substantially increased. In some cases if one were to buy a residential property for more than £1.5 million, and one owned an interest, beneficial or legal, worth more than £40,000, in any property anywhere else in the world, they could be paying up to a crippling 15% top rate on the value over £1.5million and 13% on the portion from £1 million to £1.5million.

There is no doubt that the top end of the residential market has slowed down as a result.

However there are some legitimate ways that it may be possible to utilise existing lawful reliefs.

For example someone has decided to buy a large home in the country with gardens and a lodge in the grounds, but it is not a farm, nor does it have any commercial element to it. Where the overall purchase price is £3m, and the buyer already has an interest in a property that will not be sold, the SDLT would be £363,750. That is nearly three times the price of my first flat! However, if multiple dwelling relief is calculated the purchase price is divided by the number of dwellings, the mean average is then used for the price. So the SDLT using the same criteria would be based on an average price of £1.5m being £138,750 then multiplied by the number of dwellings being bought. In this case it is multiplied by 2, giving an SDLT liability of £277,500, which is a considerable saving.

Other possibilities are where properties have a genuine commercial or agricultural element to them, provided that use is existing at the completion date, then the property could be classed as mixed use and the significantly lower mixed use rates apply.

If one is planning to put their country home on the market, it is worth looking at it with fresh eyes to see if it can be marketed to make it clear that either multiple dwelling relief or the mixed use rates can apply. The property may sell that bit more readily.

This is an area where one has to tread carefully and appraise each purchase on a case by case basis. Not every house with ancillary accommodation will qualify for multiple dwelling relief, but if you find your dream home or investment opportunity, then before you make a decision to walk away because the new SDLT has made it unaffordable, then there may be a way to make that dream property yours after all. 

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