Is a property mixed-use for SDLT if part of the building is non-residential?

Introduction

Buyers often ask whether Stamp Duty Land Tax (SDLT) should be charged at residential rates or non-residential rates where a property is not wholly residential. This commonly arises where part of a building is used, designed or valued as commercial or otherwise non-residential space.

The distinction matters because a genuinely mixed-use purchase is taxed under the non-residential SDLT rate table, which can produce a lower tax charge than the residential rules. The key question is not what the buyer intends to do later, but what is being acquired at the effective date of the transaction.

The Question

A buyer was purchasing a property and provided valuation material showing that the ground floor was non-residential. The issue was whether, for SDLT purposes, the purchase should be treated as residential or mixed-use, and therefore whether the non-residential SDLT rates should apply to the whole transaction.

Nick’s Explanation

Nick’s view was that the transaction should be treated as mixed-use. In anonymised form, his explanation was:

“From a stamp duty perspective, this would be classed as a mixed-use transaction, meaning it falls under the non-residential stamp duty rates. The sales details and valuation confirm that the ground floor is non-residential. Because of this, the entire property should be assessed as mixed-use and subject to non-residential stamp duty rates.”

The important point in that reasoning is that if part of the subject matter of the transaction is non-residential, the transaction is not purely residential. In the right case, that takes the purchase out of the residential SDLT code and into the mixed-use or non-residential rate structure.

The Law

SDLT is charged under the Finance Act 2003. The residential and non-residential rules are not simply based on whether a building looks like a house. They depend on the statutory definition of “residential property” and on what is included in the transaction.

Broadly, property is residential if it consists of:

• a building used or suitable for use as a dwelling, or in the process of being constructed or adapted for such use, and
• land that forms part of the garden or grounds of that dwelling, including rights or interests acquired for the benefit of it.

If a transaction includes both residential and non-residential property, it is treated as mixed-use and the non-residential SDLT rates apply.

In practice, the legal analysis usually turns on:

• what exactly is being bought,
• whether any part is non-residential in character at completion, and
• whether the transaction includes both residential and non-residential elements.

Where a taxpayer argues that a building was not suitable for use as a dwelling because it was in very poor condition, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That authority makes clear that “unsuitable for use” arguments will not succeed merely because a property needs repair, renovation or updating. The condition must be serious enough to take the property outside the statutory concept of residential property.

Analysis

The analysis in a case like this usually works in four steps.

First, identify the subject matter of the purchase. Is the buyer acquiring one title or one building that includes different parts, some residential and some commercial or otherwise non-residential? If yes, the transaction must be looked at as a whole.

Second, examine the factual evidence at the effective date of the transaction. That may include:

• the sales particulars,
• the valuation report,
• planning status,
• layout and physical configuration,
• actual use at the time of purchase, and
• whether any part is let, fitted out or described as commercial space.

Third, decide whether the allegedly non-residential part really is non-residential. If the ground floor is genuinely commercial premises, office space, retail space, storage space not forming part of a dwelling, or some other non-residential unit, that strongly supports mixed-use treatment.

Fourth, apply the SDLT charging rules. If the transaction includes both a dwelling and non-residential property, the whole transaction is taxed using the non-residential rate table. It is not split so that one part is taxed residentially and another part non-residentially, unless a specific statutory rule requires a different treatment.

On the facts described here, the valuation material and sales information were said to confirm that the ground floor was non-residential. If that is right, the purchase is not of purely residential property. It is a mixed-use acquisition, so the non-residential SDLT rates should apply to the whole consideration.

This is a different argument from saying a building is uninhabitable. Here, the stronger point is the presence of a non-residential element within the property being acquired. That can be more straightforward than arguing that a dwelling was not suitable for use as a dwelling, especially given the stricter approach now confirmed in Mudan.

Outcome

Where reliable evidence shows that part of the property is non-residential at the time of purchase, the transaction is likely to be mixed-use for SDLT purposes. In that situation, the non-residential SDLT rates should apply to the entire purchase price.

On the scenario described, the practical conclusion is that the purchase should be assessed as mixed-use because the ground floor was identified as non-residential.

Practical Steps

If you are assessing a similar purchase, the following steps are sensible:

• obtain and keep the sales particulars and valuation report,
• check how each part of the property is described and used at completion,
• review title documents, leases, planning documents and any commercial letting evidence,
• ask whether the non-residential element is real and present at the effective date, rather than merely intended for future use,
• ensure the SDLT return reflects mixed-use treatment if the facts support it, and
• if a conveyancer or adviser disagrees, ask them to explain their reasoning by reference to the statutory definition of residential property.

If the issue is instead whether a run-down building was unsuitable for use as a dwelling, the evidence threshold is now demanding. In light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, detailed expert evidence is usually needed, and ordinary disrepair will often not be enough.

Conclusion

If part of the property being bought is genuinely non-residential, the transaction can fall within the mixed-use SDLT rules and be taxed at non-residential rates. In the scenario discussed here, the presence of a non-residential ground floor points strongly toward mixed-use treatment.

Legal References Used

• Finance Act 2003
• Finance Act 2003, provisions defining residential property and non-residential or mixed-use SDLT treatment
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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