Date: June 2016

Top Tips on how to save on Stamp Duty Land Tax from Butler Sherborn

Paying Stamp Duty is an inevitable consequence of buying or leasing a property, and rates have risen recently, both when buying your main home, and additionally when purchasing a second or subsequent residential property.

There are, however, says Sam Butler of Butler Sherborn the Cotswold property specialists, two particular situations where it is possible - and completely legal - to save having to spend quite so much.

Project opportunity - Grange Barn
Mixed use opportunity - Party barn at Mickleton Hills Farm  
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Buying a project
Buying a project home where the stamp duty is payable on a property in need of improvement, will inevitably be less than the purchase price and tax on the same house once it has been done up, especially if it moves the completed property into a higher tax band.  Not only do you save on the stamp duty, but you also derive the benefit and flexibility of doing the work and paying for it over a period of time that suits you, as well as the opportunity of creating a home that’s designed to your taste and style that better matches the way you want to live.

“We also think this situation might help to generate a growing market for project properties, and those that have the potential for further development.  First time buyers might also be attracted to the financial gains - and tax savings! - of becoming DIYers.  It also increases the argument for buyers to regard their new home as a long term investment, rather than as a short term ‘fast-buck’ financial opportunity,” says Sam.

Buying a mixed use property
A mixed use property is one that combines both a residential element and a commercial use, offering the purchaser the financial advantage of a much lower rate of stamp duty at 4% compared with 10% which is payable on a proportion of a property’s purchase price between £925,001 and £1.5 million.

Examples of additional commercial uses include agriculture - such as grazing paddocks, holiday cottages, stables and small industrial or commercial office space.

“So if you are thinking of moving to the country, a mixed use property provides the win-win opportunity of generating an income and greatly reducing the tax burden.  Find somewhere that’s possibly bigger than you had in mind, and it could come with a host of other financial benefits,” suggests Sam Butler.

Background to Stamp Duty Land Tax - source HMRC
You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England, Wales and Northern Ireland.

The current SDLT threshold is £125,000 for residential properties, and £150,000 for non-residential land and properties.

Property value
SDLT rate
Up to £125,000
The next £125,000 (the portion from £125,001 to £250,000)
The next £675,000 (the portion from £250,001 to £925,000)
The next £575,000 (the portion from £925,001 to £1.5 million)
The remaining amount (the portion above £1.5 million)

So for example, if you buy a house for £275,000, the SDLT is calculated as follows:

0% on the first £125,000
2% on the next £125,000  
5% on the final £25,000
Total SDLT:

Higher rates for additional properties

From 1 April 2016, you also now have to pay 3% in addition to the normal SDLT rates above if buying a new residential property means you own more than one home.

Buying a project - example:

Grange Barn, South Newington, Oxfordshire - guide price £750,000

Grange Barn
From agricultural barn to contemporary home
Download high-res image
Download high-res image

This is an exciting opportunity to create a contemporary home sited in over five acres.  The existing agricultural barn has planning consent to be converted into a stylish single home comprising open plan kitchen, dining and sitting room with a central staircase, drawing room, master bedroom with en suite bathroom, three further double bedrooms, family bathroom, utility room, cloakroom and a study/fifth bedroom.  The five acres will include gardens, ample parking, double garage and large paddock.

Buying a mixed use property - example:

Mickleton Hills Farm, Chipping Campden, Gloucestershire, GL55 6LJ - guide price £3.25m

Mickleton Hills Farm
Party barn  
Party barn interior

Along with this Grade II Listed six-bedroom farmhouse come four letting cottages, a large wedding/party barn, and a range of farm barns and stables, together with about 40 acres.

The main farmhouse has been renovated throughout, and period features such as open fireplaces, exposed beams and flagstone floors have been retained.  It includes a family kitchen/breakfast room with Aga, drawing room, dining room, study and a first floor sitting room with views over the surrounding countryside, plus six bedrooms and four bathrooms.

Mickleton Hills Farm has permission to host 28 weddings a year, and has proved extremely successful over the last two years.  The beautiful brick ‘L’ shaped barn can seat 120 guests.  The four well-appointed and attractively presented letting cottages can be used as part of a wedding, or as holiday lets.  There are one three-bedroom cottage, two two-bedroom cottages and one one-bedroom cottage.

Farm buildings include a large concrete barn, a lorry barn, a six bay hay/straw barn, a Cotswold stone ‘turn out’ barn ideal for horses but could easily be used for sheep or a few cattle, a small enclosed yard with an additional building with four indoor stables, three separate wooden stables, three dog kennels with runs, an additional lean-to barn with feed mangers, a calf barn and stores.  In the largest field, which is 15 acres, there is a four bay barn which is ideal for cattle, sheep and horses.  Five paddocks varying in size offer a further 12.4 acres and there is a mature woodland of 4.4 acres.

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Note to editors:

The Cotswolds
The Cotswolds are located in the heart of England and within the counties of Gloucestershire, Oxfordshire, Warwickshire, Worcestershire and Wiltshire.  It is the largest designated Area of Outstanding Natural Beauty in England and Wales, and very roughly starts to the east of Gloucester and Cheltenham in the west, runs up to just below Evesham in the north, includes parts of West Oxfordshire where Burford is known as the Gateway to the Cotswolds, and south to the Cotswold Water Park a few miles beyond Cirencester, the former Roman city and Capital of the Cotswolds.

With excellent road and rail communications - London, Bristol and Birmingham are all within an hour by train - the area has become popular with those moving out of the city or wanting second homes to escape at weekends.

Issued by:

Sue Hitchcock / Jeremy Clarke

LawsonClarke PR
Tel: 01285 658844

Ref: BS10/2016