Q&A - What is the Stamp Duty Land Tax liability for purchasing a second property?

Q:  I am a homeowner and I am looking to buy a flat as an investment property to rent out. The flat I am interested in is connected to a shop.  If I buy the shop and the flat, will it be classed as a second home and therefore be charged at the higher rate for Stamp Duty Land Tax (SDLT)?

A:  The type of property you are looking at would be classed as a ‘mixed-use’ property.  This is where the property has both residential and non-residential elements.

The SDLT on mixed-use land or property is calculated on increasing portions of the property price when the purchase price is £150,000 or more.  This is currently calculated at 0% on the first £150,000; 2% on the next £100,000; and 5% on the remaining amount.  A solicitor can advise you of the exact SDLT liability due on your specific property and can also prepare and submit the SDLT return on your behalf as part of the conveyancing transaction.

If you were to buy a residential property as an investment rather than a mixed-use property and the purchase price is more than £40,000, you will need to pay the higher rate of SDLT.  This is calculated at 3% on the first £125,000; 5% on the value between £125,000 - £250,000; 8% on the value between £250,000 - £925,000; 13% on the value between £925,000 - £1.5m; and 15% on any remaining amount above £1.5m. Again this is something your solicitor can advise you of and prepare and submit the SDLT return on your behalf following completion of the purchase if you choose to buy a residential investment property.

You should be aware that an SDLT return is required for most transactions and this is something you should seek further advice and guidance on from your solicitor.

(Article published 08/05/2017)