Revisiting SDLT multiple dwelling relief

Since 19 July 2011 there has generally been less stamp duty land tax (SDLT) on purchases of multiple dwellings (such as a portfolio of buy to let properties). This is due to ‘multiple dwellings relief’ which allows SDLT to be based on the average value of the dwellings which form part of a transaction.

This relief must be claimed on the SDLT return so it is not automatic (and this creates potential for negligence claims). Also it is subject to a minimum overall rate of 1%.

Previously SDLT rates applied to total consideration at a flat rate. More recent rules take a banded approach to applying rates (where different rates apply to different bands) as follows:

SDLT Rates

£0 – £125,000                             0%

£125,001 – £250,000               2%

£250,001 – £925,000               5%

£925,001 – £1,500,000           10%

Over £1,500,000                       12%

Under these rules a multiple dwellings relief claim would work by calculating SDLT on the average property value (using above rates) and then multiplying by the number of properties. In practical terms this means that a portfolio with an average value of no more than £250,000 would incur SDLT at a flat 1% rate – if multiple dwelling relief is claimed.

Incorporations

Given punishing recent rules restricting interest relief for buy to let property investors this issue is highly topical. SDLT is often (but certainly not always) payable on an incorporation of a property business but many property investors will see a 1% SDLT charge as a price worth paying to get their business into a company – potentially escaping an otherwise harsh regime.

 

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