Residential property buyers given increased stamp duty land tax rates

Whether you are buying residential property as an individual or in a company, the chancellor is keen to collect tax. And with increased stamp duty land tax (SDLT) rates now in effect, careful planning is key to avoiding overpaying SDLT.

Since April this year an additional 3 per cent has been added to the SDLT cost of acquiring buy to lets for most investors. The extra cost means that investors can be subject to SDLT at rates of up to 15 per cent.

One point often overlooked is that the higher rates of SDLT only apply to the acquisition of residential property. The acquisition of a portfolio consisting of both commercial and residential property may only be subject to SDLT at rates of up to 5 per cent. Similarly the acquisition of an apartment together with the wine bar below in a single contract could qualify for this lower rate.

Another point is that where six or more residential properties are acquired in a single transaction, they are also classified as commercial. It may be cheaper to purchase a sixth flat from a vendor than pay a higher SDLT rate on five houses.

SDLT rates can also be reduced where a number of residential units are acquired. Rather than aggregating the cost of the units and being charged SDLT on the total consideration, the consideration can be averaged over the number of units acquired. This again can produce savings.

The key planning point is to make sure that any transaction is reviewed and structured in a way that you don't overpay SDLT.

If you would like to find out more about how you may be affected by the new SDLT rates please contact Adrian Benosiglio.