Stamp Duty: 4 Top Tips for Landlords

SDLT is one of the most intricately legislated areas of tax law, and Stamp Duty rates vary drastically. Today we’ll be sharing our top tips to help you save like a Tax Expert.

Stamp Duty Rates

In this article, we will cover the following:

• Reducing your SDLT rates
• Avoiding the 3% additional property surcharge
• Making the most of reliefs and exemptions

Claim Multiple Dwellings Relief (MDR)

If you’re able to buy multiple properties at once, or one property with multiple dwellings, you can save thousands in SDLT when you claim MDR. MDR allows you to work out your SDLT liability based on the average value of all the dwellings you bought.

Here’s an example. Let’s say you buy three properties, worth £20,000, £40,000 and £80,000 respectively. Rather than paying SDLT on each property separately, you pay on the average. In this case you’d only have to pay SDLT on around £46,700 despite buying a property worth £80,000.

You can also claim MDR when you buy a single property with multiple dwellings, such as an annex. However, claiming MDR this way can be complex because what counts as a ‘dwelling’ can sometimes be hard to define.

Many buyers who’re eligible for MDR don’t claim it. Don’t worry if that’s you, you can sometimes claim a refund from HMRC. Click here for more information on how to claim an SDLT refund.

Think Small for Lower Stamp Duty Rates

Transactions worth less than £40,000 are SDLT exempt and you don’t have to report them HMRC. Caravans, mobile homes and park homes are also generally SDLT exempt.

This is fantastic news for new and prospective landlords because it means you can start out small with less paperwork and tax liabilities.

Don’t Judge a Book by Its Cover (Consider Uninhabitable Properties)

For more experienced landlords or anyone looking for a new challenge, consider uninhabitable properties.

Because uninhabitable properties aren’t fit to be used as dwellings, they aren’t subject to residential SDLT rates. Instead, you’ll only be liable for non-residential rates which are substantially less. You also don’t have to pay the 3% surcharge on additional properties.

As with MDR, there are often complications when trying to define ‘uninhabitable.’ Some factors that point to a property being uninhabitable include asbestos, lack of railings or balustrades for stairs and unsafe electrical systems.

Remember, not all properties that need renovation (even extensive renovation) are uninhabitable. Be sure to get an expert to assess any property you’ve got your eye on before committing.

Derelict properties also tend to be cheaper than other properties and often fall under the £40,000 point we’ve already discussed. This means that if you’re unsure about whether a property can be classed as uninhabitable, you may still be able to cut your SDLT obligations.

Opt for a Mixed-use Property

Mixed-use properties face lower rates of SDLT than residential properties. A mixed-use property is partially residential and partly non-residential. For example, this includes a takeaway with a flat above it.

The best part is that you can combine this with MDR. If you’re buying multiple properties only one of them needs to be mixed-use for the lower SDLT rates to apply to the whole transaction.

Know Your Stamp Duty Rates

Getting to know your SDLT rates, reliefs and exemptions could save you thousands in tax. Unfortunately, many buyers will overpay on SDLT because they don’t know what reliefs they can claim. After all, SDLT is one of the most complicatedly legislated areas in tax law.