Buy to let investors – don’t pay too much stamp duty land tax!

As landlords will be aware, in addition to the normal rates of Stamp Duty Land Tax (SDLT) for residential properties, there is now  a 3% SDLT surcharge which is payable on the acquisition of  a second ‘dwelling’ (e.g. a home, a buy to let, a holiday let).

 

So how does this charge affect you if you buy more than one dwelling in one transaction?

  1. You can pay SDLT on the combined price at residential rates (+3%)
  2. You can claim Multiple dwellings relief (MDR) which allows you to pay SDLT at the residential rates (+3%) that are applicable to the average price of one of the dwellings and then multiply the end result by the number of dwellings to arrive at total SDLT payable
  3. If 6 or more dwellings are purchased the default position is that SDLT is charged at the non-residential rates, unless MDR is claimed

There is no hard and fast rule determining which option to take, because the circumstances and outcome will be different in every instance, but the difference in tax payable can be very significant.

 

Example

A landlord buys 6 houses in one transaction at a cost of £2.4m to add to his existing portfolio. SDLT using each option works out as follows:

  1. £273,750
  2. £132,000
  3. £109,500

 

It will therefore be necessary to perform calculations to determine which option is best for a specific transaction.

Sutton McGrath Hartley are experts in all aspects of property taxation, so if you are a property investor or property developer why not give David Sutton or James Hartley a call on 0114 266 4432 to arrange a free no obligation consultation. Alternatively, please email dsutton@suttonmcgrathhartley.co.uk or jhartley@suttonmcgrathhartley.co.uk

Sutton McGrath Hartley is a multi-disciplinary firm of chartered accountants, financial advisers and lawyers offering comprehensive financial expertise for all business, personal and family interests.

James Hartley & David Sutton, Partners at Sutton McGrath Hartley


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