The many rules, reliefs and exemptions related to SDLT can be complicated, but mistakes can prove costly. Here are some useful FAQs brought together from our experience of common queries we see from conveyancers.
First time buyers relief (FTBR)
A purchaser inherited a share in a property but never lived in it – will FTBR will be available to them on a future purchase?
No – to qualify for FTBR, the purchaser must never have owned or had an interest in a property anywhere in the world. Whether they lived in the property or not is irrelevant.
Will a joint purchase of a property where one buyer is a first time buyer qualify for the relief?
No. All purchasers must be first time buyers for the relief to apply.
A purchaser owns a non-residential property. Will they qualify for FTBR?
Yes. Owning non-residential property will not prevent a claim for FTBR, provided the property does not contain any dwellings.
Will FTBR apply if a first time buyer intends to rent out the property they are purchasing?
No. The purchaser must intend to live in the property to qualify for FTBR.
Higher rate
Does the higher rate only apply if the purchaser owns another property?
No. The higher rate can also apply to a purchase consisting of more than one dwelling in a single transaction or a linked transaction. It’s important to ascertain how many dwellings are being purchased and whether any of the dwellings are subsidiary dwellings.
If a purchaser is buying a new property following divorce but still owns a share of the family home, will the higher rate apply?
No. If there has been a financial order within divorce proceedings specifying that the former matrimonial home will remain in joint names, the higher rate will not apply to the new purchase.
A married couple are selling their previous main residence to buy a new one, but the wife owns a buy to let property. Will the higher rate apply?
No. The sale of the previous main residence means that the new property is a replacement of the previous main residence, so the buy to let property will be ignored and the higher rate will not apply.
A purchaser is buying a property in their sole name after living in rented accommodation. Their spouse has a buy to let property which will not be sold. The purchaser owns no other property. Will the higher rate apply?
Yes. Because the purchaser’s spouse has an additional property, the transaction will be treated as though both spouses were purchasers and the higher rate will apply.
A purchase consists of a dwelling and a shop, but the property is not a replacement of a main dwelling. Will the higher rate apply?
No. The higher rate only applies to the residential rate of SDLT. This would be a mixed use transaction, meaning that the non-residential rate is applicable and the higher rate would not be relevant.
Purchasing six dwellings or more
Now that MDR is no longer available, does it make any difference how many dwellings are being purchased?
Yes. A purchaser can elect to pay the non-residential rate of SDLT if they are purchasing six or more dwellings in a single transaction or a linked transaction. It will be important to assess whether the dwellings will meet HMRC’s criteria to be considered a dwelling before applying the non-residential rate of SDLT.
Non-UK resident purchaser
A married couple are purchasing a residential property in the UK. One spouse has not lived in the UK for more than 183 days in the year preceding the purchase but the other has. Will the non-resident surcharge apply?
No. If one spouse has lived in the UK for more than 183 days in the 12 months preceding the purchase, the purchasers will be deemed resident and the surcharge will not apply.
Mixed use property
A purchaser is buying a property which consists of three flats and a small commercial unit on the ground floor. Will the residential rate of SDLT apply as the purchase includes separate dwellings?
No. This could be considered a mixed use transaction, meaning that the non-residential rate of SDLT will apply. Not only should this result in a lower amount of SDLT, it will also mean that the higher rate of SDLT is not applicable.
A purchaser is buying a three-storey property and the lower ground floor was used by the sellers for their business. Will the non-residential rate of SDLT apply?
No – not necessarily. It will depend on the property itself and whether the lower ground floor could be considered suitable for use as a dwelling. If the lower ground floor is subject to adaptations, for example if there is machinery or specialist equipment present which means it could never be considered part of the dwelling, the non-residential rate should apply. However, if the lower ground floor is merely a room or area used for a business but could just as easily be used as a room or area of the main dwelling, it will be residential. (See Andrei Tretyakov v HMRC TC/2023/16164)
A purchase of a residential property includes land which is separated from the main house by a road, is not visible from the house and is used by the public. Will this be considered garden and grounds and mean the residential rate of SDLT should be paid?
No. If the land is separate to the dwelling, does not support or provide any benefit (including visual benefit) to the dwelling and is used by members of the public, it is outside the definition of garden and grounds. The purchase will be subject to the non-residential rate of SDLT. (See Guerlain Desai v HMRC TC/2022/13097)
These are just some of the areas that cause confusion – there are many more, some of which are very complex. If you’re unsure what rules or relief apply, specialist SDLT advisers can offer expert advice and guidance.
Louise Wise, Relatus
