SDLT Mixed Use

Introduction 

Stamp Duty Land Tax (“SDLT”) is a tax charged on the acquisition of land or property in England and Northern Ireland. It differs from Stamp Duty or Stamp Duty Reserve Tax which are levied on shares. 

From 1 April 2025, the SDLT residential rates are increasing and will be as follows: 

Property Value	SDLT Rate
Up to £125,000	0%
From £125,001 to £250,000	2%
From £250,001 to £925,000	5%
From £925,001 to £1.5m	10%
Above £1.5m	12%

The non-residential rates by comparison are much lower and as follows: 

Property Value	SDLT Rate
Up to £150,000	0%
From £150,001 to £250,000	2%
Above £250,000	5%

Residential v Non-Residential Rates 

As seen above, non-residential rates are typically more advantageous, except for properties valued at £125,000 or less. While the non-residential rates will be better for properties worth more than £125,000, a large SDLT saving will only be realised when a property is worth more than £925,000 and the 10% residential band kicks in.

For properties above this threshold, non-residential rates offer better savings, with significant reductions occurring only when the property exceeds £925,000, triggering the 10% residential band.  

There are also other factors to consider as, if the buyer owns another residential property, they will have to pay a 5% surcharge on top of the residential rates. 

Similarly, if a non-natural person (e.g. a company) purchases a residential property, there will also be a 5% surcharge, and potentially a flat 17% rate if the value of the property exceeds £500,000. 

Therefore, SDLT savings from non-residential rates can be even more substantial.  

We would recommend that professional advice is sought as claims for mixed use SDLT are

rarely simple.

Mixed-Use 

What is non-residential property? 

Quite simply, non-residential property is anything that does not fall within the definition of residential property in s. 116(1)(a), FA 2003. 

 Specifically, it is property which is not: 

• In use, suitable for use, or under construction as a dwelling. 
• Land that forms part of the garden or grounds of a dwelling. 
• An interest or right over land that subsists for the benefit of a building or land as described above. 

Furthermore, the legislation confirms that land or property which has both residential and non-residential components (“mixed-use”) are subject to the non-residential rates. 

How to Determine if My Property Purchase is Mixed-Use? 

There is no rulebook which determines whether a property is mixed-use and, therefore, this can be a grey area of tax legislation, and so we recommend that advice is sought to determine the SDLT status of the property prior to completion. 

Common cases involve: 

• Country houses with large paddocks or grazing land included in the sale,
• Offices with residential flats connected, or
• Agricultural properties/land.
  
  

To determine whether a property is wholly residential or not, the SDLT status should be determined at the date of completion. Intended future use is irrelevant; and historic use can only be used as a guide.  

HMRC and the courts apply a multi-factorial test, considering factors like land use, layout, and proximity to the dwelling to determine whether a property is mixed-use. 

Option 1 – The Dwelling is Wholly Residential 

If the dwelling is entirely residential, then any land that forms part of the dwelling’s “garden or grounds” will, by default, be residential. 

Accordingly, if the dwelling is wholly residential, the only way the property is mixed-use is if there is a portion of the land which is not the garden or grounds of the dwelling.

Some of the more common factors to be considered can be seen below: 

• Use of the land. 
• Layout of land and outbuildings. 
• Proximity to the dwelling. 
• Extent/size of the land. 
• Ownership of the land. 
• Accessibility of the land from the property
• Obligations/Limitations/Intrusions presented by the commercial activity. 

A key point is that the presence of commercial activity itself does not automatically render the property mixed-use.

Option 2 – The Dwelling Home is not Wholly Residential 

In this scenario, it remains to determine that the building is not wholly residential. 

According to the legislation, a building is wholly residential when it is either: 

• In use as a dwelling, 
• Suitable for use as a dwelling, or 
• In the process of being constructed or adapted for use as a dwelling. 

It should be obvious when the building is in use as a dwelling or when it is under construction for such a use. The only difficulty surrounds what “suitable for use” means. 

Uninhabitable Dwellings 

While not being examples of mixed-use property, uninhabitable properties are not suitable for use as a dwelling and will be subject to the non-residential rates

A building may not be wholly residential if it’s unsuitable for habitation. “Uninhabitable” properties are subject to non-residential rates, and this is often a grey area.  

Only properties with fundamental issues, beyond minor repairs, are considered uninhabitable. The need to merely fix a broken boiler or replace a kitchen will not render the building uninhabitable. 

 SDLT claims for “uninhabitable buildings” often fail due to a lack of understanding of the case law and legislation.  

In terms of mixed used properties, a brief overview of the more common factors to be considered are:

• Physical Attributes: i.e. facilities of the dwelling, independent access, and privacy. 
• Private/Public Legal Conditions: i.e. planning permission restrictions. 
• Council Tax/Business Rates: these can indicate the building’s suitability for residential or business purposes. 

The key factor here is the ease with which a space (e.g. residential flats connected to offices) could be converted to residential property. 

The presence of commercial activity within the building itself does not render the property mixed-use. 

Amendments to SDLT Returns 

You have 12 months after the filing date to amend your SDLT return if you realize the property was non-residential rather than residential. The filing date is 14 days after the effective date of the transaction. See HMRC’s website Stamp Duty Land Tax online and paper returns – GOV.UK for more information. 

How Can we Help? 

If you are purchasing a property that you feel has non-residential components and may be mixed-use, it’s important that you obtain full, comprehensive advice as this is a complex area of tax law and one which is seeing increasing challenge from HMRC. We would be happy to schedule an initial call with one of our experienced tax consultants to discuss your options. 

If you have any queries on any of the information in this article, or need help with regards to SDLT, please contact a member of the team to see how we can help.

Disclaimer: This article is for informational purposes only. Independent tax advice is recommended before claiming mixed-use on your SDLT forms.