Read the original guidance here:
HMRC SDLT: SDLTM29985 – Reliefs for transfers involving multiple dwellings: Example 9

Understanding SDLT Reliefs for Transferring Multiple Dwellings

This article outlines the key principles of Stamp Duty Land Tax (SDLT) reliefs when buying properties with multiple dwellings. We will explore an example that illustrates how the tax is calculated when purchasing a combination of residential and non-residential properties.

What is SDLT?

SDLT is a tax charged by the government on property purchases in England and Northern Ireland. It’s important to know that SDLT applies differently based on whether the properties being purchased are residential or non-residential.

Key Concepts

• Relevant transaction: This is any acquisition of property that requires SDLT to be paid.
• Dwellings: For SDLT purposes, dwellings are considered any residential properties such as houses, flats, or apartments.
• Consideration: This is simply the amount paid for the property. In our example, the overall consideration for the estate is £12,000,000.
• Non-residential properties: These refer to properties that do not qualify as dwellings, such as farm buildings and agricultural land.
• Tax Rates: The rate of SDLT that applies depends on the type of properties being purchased and their value.

Example of a Property Purchase

Let’s look at an example to clarify how SDLT is calculated when multiple dwellings are involved.

The Property Acquisition

An individual purchases a freehold estate. This estate consists of:

• A mansion
• A stable block
• Four acres of gardens
• Twelve flats and houses for domestic and estate workers
• Farm buildings
• Fifty acres of farmland

The total price paid for this property package is £12,000,000. Since this purchase involves acquiring a total of 13 dwellings (the mansion, flats, and houses), it qualifies as a relevant transaction for SDLT.

Attributing Value to Dwellings and Non-Residential Property

In this case, the total consideration for the dwellings is determined to be £8,000,000. The remaining £4,000,000 is attributed to the non-residential properties, which include farm buildings and farmland.

Calculating the SDLT on Dwellings

Residential Property Calculation:

• The total consideration for the residential properties (dwellings) is £8,000,000.
• This amount is divided by the number of dwellings to find the average value: £8,000,000 ÷ 13 = £615,385.
• The SDLT will be calculated based on this average amount and then multiplied by the number of dwellings (13).

It’s essential to know that the buyer may be liable for the non-resident rates of SDLT if they are not a UK resident. More details about these rates can be found at SDLTM09860.

Calculating SDLT on Non-Residential Property

Non-Residential Property Calculation:

• For the non-residential portion of the transaction, which is valued at £4,000,000, the tax will be calculated according to non-residential rates.
• In essence, the SDLT applicable to the overall transaction value of £12,000,000 should be divided according to the consideration of £4,000,000 attributed to the non-residential properties.

Overview of Tax Rates

When calculating SDLT, it is essential to apply the correct rates based on the type of property. The UK government provides specific tax bands for residential and non-residential properties, and the tax due is tiered based on the values within these bands.

Examples of SDLT Rates

The following illustrates how SDLT rates can differ between residential and non-residential properties:

Residential Property Rates

For example, if the average value of the residential dwellings is £615,385, the SDLT may be calculated based on the appropriate band rates for residential properties. The current rates for residential properties include:

• 0% on the portion up to £125,000
• 2% on the portion from £125,001 to £250,000
• 5% on the portion from £250,001 to £925,000
• 10% on the portion from £925,001 to £1.5 million
• 12% on the portion over £1.5 million

Non-Residential Property Rates

For non-residential properties, the rates are as follows:

• 0% on the first £150,000
• 2% on the portion from £150,001 to £250,000
• 5% on amounts over £250,000

Conclusion

When dealing with a complex purchase that includes both residential and non-residential properties, it is crucial to understand how to calculate SDLT accurately. The example provided helps to illustrate how the total consideration should be divided and the relevant tax rates applied.