Stamp Duty Land Tax (SDLT) is levied on property purchases in England and Northern Ireland, with thresholds determining the amount owed. Properties priced up to £250,000 (or £425,000 for first-time buyers) incur no SDLT, while rates of 5% apply to main residences priced between £250,001 and £925,000, and 8% for additional properties in that range. The top rates are now 12% for main residences and 17% for foreign buyers of second homes. Scotland (LBTT) and Wales (LTT) have their own tax structures.

Amidst a challenging cost of living situation, David Hannah, Group Chairman of Cornerstone Tax, advises seeking expert guidance to avoid overpaying. Cornerstone Tax notes five frequently overlooked SDLT reliefs and exemptions that could help taxpayers save thousands.

Exemption #1: Buy-to-let Landlords

Considering incorporation? It’s worth noting that 50% of portfolio incorporations are exempt from paying SDLT or capital gains tax. However, many miss out on these exemptions by opting for the cheapest legal and accounting advisors, who may not be well-versed in the intricacies of stamp duty and CGT rules. This oversight can lead to costly mistakes and may deter landlords from incorporating due to misunderstandings or poor advice.

Exemption #2: Developers

If you’re purchasing for occupation, investment, or development, you might be eligible to save up to £87,000 on SDLT through an often-overlooked relief called Multiple Dwellings Relief. This relief involves paying stamp duty based on the average price of each dwelling in the transaction, potentially saving you between £10,000 and £87,000 on a property with a single annex, depending on its price.

Exemption #3: Property traders

Many property deals can avoid SDLT through four specific reliefs tailored for “Flippers.” These include purchases to restore a broken chain, acquisitions from the personal representatives of a deceased person, part exchange properties from those buying a “new” home, and purchases from individuals relocating for employment. All of these transactions qualify for a 100% SDLT relief, subject only to certain limits on refurbishment expenditure and the area of land acquired.

Exemption #4: Pensions

If you have a SIPP or SSAS pension, transferring commercial premises into them has been a common strategy for business owners, offering tax efficiency and potential for asset appreciation and rental income growth. However, Stamp Duty has been erroneously paid by pension providers in many cases where no duty is due. HMRC has confirmed this in certain circumstances. Cornerstone’s strategic partners have successfully recovered over 150 overpayments, averaging around £26,000 each. With this error persisting since 2007, projections suggest up to 30,000 pensions are affected, potentially entitling pensioners to upwards of £6 billion in stamp duty refunds.

Exemption #5: Mixed-use property

In very many cases, people are buying homes that have features that mean they are not wholly residential and are often unaware that as a result they are not liable to pay the full residential rate of stamp duty but rather the lower mixed-use or commercial rate 5%.

The benefits don’t stop there, because in addition to not paying the residential rate these mixed-use properties also don’t pay any of the surcharges for second homes 3% or by non-residents 2%.

This means that on the most expensive properties being able to successfully claim could save you 12% of the purchase price.

Article supplied by David Hannah, Group Chairman of Cornerstone Tax

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