Stamp Duty on Mixed Use Property

Published by UK Property Accountants
Published Date: June 1, 2023

In this blog post, we will delve into the topic of Stamp Duty Land Tax (SDLT) on mixed-use properties, offering valuable insights for tax advisors and business owners alike. Let's start with the basics.

Understanding Mixed-Use Properties

Mixed-use properties refer to properties that encompass both residential and non-residential components. These can include combinations such as a flat connected to a shop, doctor's surgery, or office space.

Essentially, a mixed-use property combines commercial and residential aspects within a single premises. To illustrate, imagine a building with residential flats occupying the upper floors and a bustling coffee shop operating on the ground floor.

An Introduction to SDLT on Mixed-Use Properties

When it comes to purchasing non-residential or mixed-use land or property, Stamp Duty Land Tax (SDLT) is applied to progressively higher portions of the property price, specifically when the payment exceeds £150,000.

It's important to note that these rates and thresholds may differ for residential properties or in specific circumstances. Therefore, it is recommended to consult the official guidelines or seek professional advice when considering the purchase of non-residential or mixed-use land or property to understand the applicable SDLT rates and thresholds accurately.

SDLT Rates for Mixed Use Property

Determining whether a property qualifies as residential or not is a straightforward "all or nothing" process. You don't need to worry about dividing the consideration between the residential and non-residential aspects of the property, unless multiple dwellings relief comes into play. In such cases, consideration is limited to the apportioned value allocated to the dwellings.

Where a transaction includes land that is not residential property it is “mixed-use”, so following rates apply:

National Insurance

SDLT Rate 

Upto £150,000

0%

The next £100,000 (the portion from £150,001 to £250,000)

2%

The remaining amount (the portion above £250,000)

5%

HMRC Guidance on Mixed Used Property

HMRC manual  for mixed used property are SDLTM00390 and SDLTM00395. These manuals provide technical guidance but may not offer definitive answers in every case.

How Claims Work for Mixed Use Property

If you are purchasing a mixed-use property, you need to complete the SDLT 1 form, selecting code 2 under "type of property." Additionally, you must fill out form SDLT4. Detailed instructions on how to complete your Stamp Duty Land Tax SDLT1 return can be found by visiting the HMRC site.

Can I Claim Multiple Dwellings Relief (MDR) on a Mixed-Use Property?

If you have a mixed-use property, you can claim MDR only for the residential part of the transaction. For the non-residential portion, normal non-residential rates apply. It is essential to apportion the consideration between the residential and non-residential portions. For the residential part where MDR applies, the residential SDLT rate must be applied.

You can find detail SDLT rates for different types of properties in our article “Stamp Duty Rates UK 2022/23 & Calculate Your SDLT.”

Conclusion

In conclusion, understanding the Stamp Duty Land Tax (SDLT) on mixed-use properties is crucial for tax advisors and business owners. By grasping the classification of mixed-use properties and the corresponding SDLT rates, you can navigate the tax landscape with confidence.

Remember to consult the HMRC manuals for specific guidance, complete the necessary forms accurately, and consider the eligibility for Multiple Dwellings Relief (MDR) when applicable. Stay informed about the latest SDLT rates and regulations to ensure compliance and make informed financial decisions.

Take control of your tax planning today and consult with our experienced tax advisors to ensure you make the most of your mixed-use property investments.

Contact us now to schedule a quick initial Discovery Call and explore the possibilities!

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