SDLT: What is it and what can I do to minimise it?

With the economy showing signs of recovery and with interest rates at an all-time low, there has never been a better time to start, or expand, your property portfolio. However, as with so many things, there are extra costs of which an investor should be aware. Buying a house is not only going to cost you the price tag attached to the bricks and mortar. A consideration which should never leave the mind of a potential investor is the implication of Stamp Duty Land Tax 'SDLT'. SDLT is the tax payable on the purchase of property or land and is applicable to both freehold and leasehold purchases. For residential property SDLT is charged on a sliding scale from 1%, over the £125,000 starting point, to a maximum 12% for properties over £1.5m. A further band of 15% exists for properties purchased for over £500,000 by non-natural persons. If your purchase is non-residential or mixed use, the SDLT scale changes and the threshold is increased to £150,000 up to a maximum amount of 4% for purchases over £500,000. A key difference between the two is that SDLT is applicable to the entire purchase price in non-residential purchases compared to residential purchases where SDLT is paid at increasing rates for each price band over £125,000. Opportunities for mitigation of SDLT liability are limited and we do not advise on SDLT avoidance schemes. There is however one important statutory relief which is still available to investors with residential portfolios. This arises on the sale of more than one residential property to another buyer where Multiple Dwelling Relief is available. The amount of SDLT payable under this relief is assessed as follows:

  1. The aggregate total value of the portfolio sold is divided by the number of properties contained within. This provides the average cost against which SDLT liability is assessed on the residential scale. This is then multiplied by the number of units in the portfolio. This is subject to a minimum SDLT liability of 1% on the value of the whole portfolio.

To find out what your SDLT position may be, whether you could qualify for the purposes of Multiple Dwelling Relief, or to discuss anything relating to the transfer of properties please contact our offices on 0114 266 6660 and speak to one of commercial property experts.

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