Can sellers plan effectively for stamp duty land tax (SDLT)?
24th July 2026
Posted in Articles, Stamp Duty, Stamp Duty Land Tax by Andrew Marr
The issue
Stamp duty land tax (SDLT) is a tax which is payable by a buyer. Unsophisticated sellers will say “SDLT is the buyer’s problem” but the commercial reality is that buyers will be prepared to pay more to the seller if the SDLT is reduced. Anecdotally we are hearing about more cases where sellers are ‘packaging’ up properties in a way that is SDLT-friendly to a buyer. We are starting to get asked if SDLT anti-avoidance rules could apply to overturn the advantages. This is quite an interesting question.
This issue usually revolves around the fact that residential SDLT rates are significantly higher than non-residential SDLT rates. Non-residential rates are 0% up to £150,000, then 2% up to £250,000 and 5% thereafter. Standard residential rates are 0% up to £125,000, then 2% up to £250,000, then 5% up to £925,000, then 10% up to £1.5m and then 12% thereafter. Although these seem high there can also be a 5% residential surcharge for those owning more than one dwelling at the end of the day of sale and there is also a 2% non-UK resident surcharge. You can probably see the attraction of securing non-residential SDLT rates.
The different ‘packages’
Farming activity
This is not really a ‘package’ as such. Where some land is used for commercial farming activity then there can be an argument that non-residential rates should apply for the whole transaction. Canny buyers will want to see evidence of a formal grazing agreement with farmers that they can take over on completion. There have been many tax cases around these sorts of transactions, and the tide has turned slightly against taxpayers in recent years.
A ‘bolt-on’ piece of non-residential land
If a seller sells a £5m residential property along with £20,000 worth of non-residential land (say) then prima facie non-residential rates will apply. You do not need to take my word for this because it was a point highlighted by HMRC in their consultation paper a few years ago. Here they made the complaint that “this treatment [non-residential SDLT rates] applies even where only a small proportion of the property is residential in nature. There is no lower limit on the amount of non-residential property in a purchase to take advantage of this treatment. In addition, there are currently no rules requiring that the residential and non-residential property be closely located to each other”.
Six or more dwellings
Non-residential rates apply if six or more dwellings are included in a single transaction. Although this would typically involve the purchase of six substantial interests in separate dwellings, a freehold reversion interest can be a dwelling. Therefore, prima facie if a £5m residential property is sold alongside five freehold reversion interests then non-residential SDLT rates would apply. A freehold reversion interest is often only worth a very small amount. For example, a freehold from which a 999 year lease has been granted would not have much value. Although we have not seen this in practice, packaging these things together with the ‘main property’ would appear to give an attractive SDLT result.
Anti-avoidance legislation
The main anti-avoidance legislation is section 75A FA 2003. Although this is quite complex legislation, it seems fairly clear that it cannot apply to a purchase by a buyer who is presented with a single transaction. This legislation is generally aimed at artificial schemes with many steps being used to avoid SDLT. It would also seem unlikely that the general anti-avoidance rule (GAAR) could apply to the above scenarios. Perhaps the tax system is relying on the fact that sellers will not go out of their way to make transactions tax-efficient for potential buyers.
Forbes Dawson view
These opportunities all arise due to the strange disparity between residential and non-residential rates for SDLT. It seems strange, for example, that the rules dictate that if a transaction is made up 95% of residential land and 5% of non-residential land then the whole transaction should be subject to non-residential rates. Is it fair that the purchaser of a £2m pad in the country (with a small amount of farming) should pay significantly less SDLT than the purchaser of a relatively small Mayfair apartment? Perhaps with a difficult expensive housing market, these strategies will become more common for sellers trying to steal a market advantage. As an SDLT advisor I may be concerned about the potential for HMRC to apply anti-avoidance legislation if an expensive house is packaged up with five cheap freehold reversions, but I may have difficulty concluding that anything other than non-residential SDLT rates are applicable.
