Stamp duty on flats and shops: HMRC’s multiple-home example
In short
HMRC’s example splits a headlease premium between empty flats, long-let flats and shops. Only the empty flats are averaged for the historic relief calculation.
- Check existing leases closely.
- Support the value split with evidence.
- Check the law and rates for the transaction date.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on flats and shops: HMRC’s multiple-home example
Buying a long lease over flats and shops can mean more than one stamp duty calculation. In HMRC’s example, the empty flats get the benefit of averaging. Long-let flats and shops do not. That split can make a large difference.
What this rule is about
This page explains HMRC’s historic example of multiple dwellings relief, which was a tax break for buying more than one home at once. HMRC’s example concerns a 999-year headlease over five flats and four shops.
Two flats already have 99-year underleases. Three are empty. For the headlease, the buyer pays a £1.25 million premium and £6,000 yearly rent.
You might think all five flats count equally. They do not in HMRC’s example.
What the official source says
For the historic relief, HMRC treats the three empty flats as the homes that qualify, while excluding the two long-let flats because the buyer’s headlease sits above underleases longer than 21 years. That distinction matters.
- The £1.25 million premium is split on a fair basis.
- £750,000 is allocated to the three empty flats.
- £100,000 is allocated to the two long-let flats.
- £400,000 is allocated to the four shops.
- The amount for the three empty flats is divided by three.
- That gives an average of £250,000 per flat.
- Tax for that part is the tax on £250,000, multiplied by three.
That is the core idea: work out tax on an average price for the homes that count, then multiply it back up. The method does not turn the shops into homes.
For the other £500,000, covering the long-let flats and shops, HMRC says the rate is set by the total £1.25 million premium. Because the property is mixed, HMRC applies the non-residential table to that calculation.
HMRC also says the rent is dealt with separately. You calculate its tax in the usual way by working out the present value of the rent over the lease term, rather than folding it into the premium calculation. It remains a separate charge.
What this means in practice
One price in a contract does not necessarily produce one tax calculation. Here, the split between empty flats, let flats and shops drives the result.
This is the part people get wrong: a long lease already granted over a flat can change whether the superior lease counts for the historic relief test.
- Read the title documents, not just the sales details.
- List every flat, shop and other part of the building.
- Check whether any flat has a lease longer than 21 years.
- Keep evidence supporting the value given to each part.
- Work out the premium charge separately from the rent charge.
- Do not assume a mixed building gets the normal home-only tax treatment.
HMRC’s manual says the higher rates for additional homes do not apply in this example. It gives a specific reason: the commercial element is not negligible. That is HMRC’s view of these facts, not a general rule that every purchase with a shop avoids the higher rates.
The manual also flags increased rates for non-UK residents. If a buyer meets the legal test for a non-resident transaction, those rates may affect the residential part.
How to analyse it
Start with the property and lease structure. Only then turn to the figures. Marketing a block as “residential with retail” will not, by itself, settle the tax position.
- Find the effective date of the purchase.
- Check whether the historic relief was available on that date.
- Identify each home and commercial unit in the deal.
- Read every existing lease and record its original term.
- Decide which interests count for the relief test.
- Split the premium fairly between the relevant parts.
- Average the amount allocated to the homes that count.
- Calculate the remaining mixed-property element by reference to the full premium.
- Calculate rent separately using its net present value.
- Check whether residence status could change the rate.
Example
Take HMRC’s figures. Divide the £750,000 assigned to the three empty flats by three. The result is £250,000. The tax for that residential part is therefore three times the tax on £250,000, using the rates that applied on the transaction date.
The remaining £500,000 is not simply taxed as though it were a separate £500,000 purchase. Since the overall deal includes shops, HMRC sets its rate by reference to the full £1.25 million premium rather than treating that remaining amount as a stand-alone purchase. The £6,000 annual rent then has its own calculation.
The source does not state a transaction date. It therefore does not provide enough information to give one final tax bill in pounds.
Why this can be difficult in practice
Usually, the arithmetic is not the hard part. Instead, the difficult work lies in identifying what the buyer has actually bought, determining which interests count, and supporting the value split with evidence. That takes care.
- An underlease may be overlooked in a large title pack.
- A lease term must be checked carefully.
- A value split cannot simply be chosen because it produces less tax.
- Shops may be obvious, but other commercial areas can be less clear.
- The higher-rate result may change if the commercial part is small.
- Residence rules are more detailed than where someone happens to live.
There is a further problem. This source is a historic HMRC example. Before relying on it for a live purchase or claim, the transaction date and the law then in force need checking.
Key takeaways
- Long underleases can affect which flats count for historic multiple-home relief.
- A mixed block may require separate calculations for different parts of the price.
- Rent under a lease is taxed separately from the premium.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 Schedule 6B para 2 — which transfers could qualify for multiple homes relief
- FA 2003 Schedule 6B para 4 — splitting the price between homes and other property
- FA 2003 Schedule 6B para 5 — calculating tax on the part allocated to homes
- FA 2003 section 55 — tax tables for residential and mixed property purchases
- FA 2003 section 56 — separate tax calculation where a lease includes rent
- FA 2003 Schedule 5 para 2 — tax on rent using the lease net present value
- FA 2003 Schedule 5 para 9 — separate charges on lease rent and premium
- FA 2003 Schedule 4ZA para 5 — higher-rate test for purchases of several homes
- FA 2003 section 75ZA — increased rates for qualifying non-resident transactions
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The source does not state when the transaction took place, so it cannot establish the tax due in pounds under today’s law.
- The supplied statutory material does not resolve the current transitional position for historic multiple dwellings relief claims.
- Whether a payment split is fair depends on the facts and evidence for each part of the building.
- Non-UK residence has detailed statutory tests. It cannot safely be decided merely from a buyer’s nationality or address.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- the lease and plans showing each flat and shop
- the length and terms of every underlease
- a supportable valuation split for the premium
- the annual rent, lease term and rent-review provisions
- the transaction’s effective date
- each buyer’s residence facts where non-resident rates may matter
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty on flats and shops: HMRC’s multiple-home example [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 Schedule 6B para 2 - which transfers could qualify for multiple homes relief https://www.legislation.gov.uk/ukpga/2003/14/schedule/6B/paragraph/2/2025-11-17 - FA 2003 Schedule 6B para 4 - splitting the price between homes and other property https://www.legislation.gov.uk/ukpga/2003/14/schedule/6B/paragraph/4/2025-11-17 - FA 2003 Schedule 6B para 5 - calculating tax on the part allocated to homes https://www.legislation.gov.uk/ukpga/2003/14/schedule/6B/paragraph/5/2025-11-17 - FA 2003 section 55 - tax tables for residential and mixed property purchases https://www.legislation.gov.uk/ukpga/2003/14/section/55/2025-11-17 - FA 2003 section 56 - separate tax calculation where a lease includes rent https://www.legislation.gov.uk/ukpga/2003/14/section/56/2025-11-17 - FA 2003 Schedule 5 para 2 - tax on rent using the lease net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 9 - separate charges on lease rent and premium https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/9/2025-11-17 - FA 2003 Schedule 4ZA para 5 - higher-rate test for purchases of several homes https://www.legislation.gov.uk/ukpga/2003/14/schedule/4ZA/paragraph/5/2025-11-17 - FA 2003 section 75ZA - increased rates for qualifying non-resident transactions https://www.legislation.gov.uk/ukpga/2003/14/section/75ZA/2025-11-17 HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm29975 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. HMRC guidance is HMRC's view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The source does not state when the transaction took place, so it cannot establish the tax due in pounds under today's law. - The supplied statutory material does not resolve the current transitional position for historic multiple dwellings relief claims. - Whether a payment split is fair depends on the facts and evidence for each part of the building. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty on flats and shops: HMRC’s multiple-home example
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