There has been a number of changes to the Stamp Duty Land Tax  (SDLT) rules, also given that with various incentives available for limited period, its only right that we visit some of the rules especially relating to Multiple Dwellings, which could result in substantial tax savings

Let us assume  a scenario where a client is purchasing three residential investment properties from the same seller, the client must pay Stamp Duty Land Tax at the “higher rates” for additional dwellings (supplementary 3%).

However, Multiple Dwellings relief may be available on the purchase following the temporary rate changes introduced by the Chancellor in July

Let us  use for illustration purposes  use property values as  £530,000, £325,000, and £290,000 respectively, let us also assume that all these properties will be  let-out commercially to unconnected parties.

The Chancellor’s temporary initial rate band of £500,000 applies to transactions taking place between 8th July 2020 and 31st March 2021. HMRC have confirmed their view that this will also apply to transactions liable to the higher-rates.

A claim for Multiple Dwellings Relief provides for the SDLT calculation to be based on the average price for each property, instead of a single computation based on the combined price. The calculation based on average price, rather than the combined price, may result in a lower overall SDLT charge with part of the total consideration falling into lower tax bands.

Temporary rates and bands currently in force are as follows:

Up to £500,000

3%

The next £425,000 (consideration between £500,001 and £925,000)

8%

The next £575,000 (consideration between £925,001 and £1.5 million)

13%

The remaining consideration (over £1.5 million)

15%

In the illustration above, the “default” SDLT calculation, without multiple dwellings relief, would be as follows:

Total Consideration £1,145,000

First £500,000 @3% =

£15,000

Next £425,000 @ 8% =

£34,000

Balance of £220,000 @ 13% =

£28,600

Total SDLT

£77,600

A calculation using Multiple Dwellings Relief together with the temporary reduced rate, would be as follows:

Total consideration £1,145,000 / 3 = £381,666 @ 3% = £11,449 SDLT payable in respect of each property, total SDLT payable therefore £34,347, compared to £77,600 without the claim for Multiple Dwellings Relief a net SDLT saving of £43,253

The net SDLT saving of £43,253 results from £645,000 of the total consideration, chargeable at a combination of 8% and 13% in the first calculation above, becoming chargeable at 3% with the benefit of multiple dwellings relief.

Talk to us if you are considering property transactions, we are easy to contact www.shaikhandcoaccountants.com, or 01892 552696

Stay calm, stay safe…stay well and remember, ‘JOY’ is contagious too!

Disclaimer Notice

The information contained in this  article is for general information purposes only and does not constitute advice, Whilst we endeavour to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose. We recommend that professional advise should be taken from a suitably qualified expert before undertaking any action.

CategoryTax Advice
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