Careful lotting of farmland is required to save SDLT

The Autumn Statement in December saw wholesale revisions of the Stamp Duty Land Tax (SDLT) system.

The changes will bring major savings on residential transactions below £937,500 but anything above that figure could result in a higher SDLT bill.

What effect may this have on farmers?

The existing 4% SDLT rate has remained unchanged for “non-residential and mixed use properties” – the category which covers most working farms. Care must be taken when selling large agricultural holdings that include residential properties. At a price of £1 million, the difference in SDLT using the new residential system and the 4% mixed use rate is only £3,750. Perhaps not enough to concern a buyer but where properties are of a substantial size and likely to attract prices in excess of £2 million the amount of SDLT payable becomes important.

The point is illustrated by the wide difference in tax – at £153,750 the amount of SDLT payable on a residential £2 million property is almost double the £80,000 fixed rate 4% payable on a £2 million residential property which qualifies as a “mixed use property”. When the residential element is worth £5 million the saving is even more eye watering with the sliding scale SDLT difference rising to £240,000.

The increase in SDLT, if you lose the protection of the “mixed use property” banner, means that over-lotting an estate or farm may remove it from the protection which is a benefit of dealing with rural property.

It is very important that sellers consider the financial burden of buyers when deciding their sale strategy. Careful discussions with those involved before sale particulars are prepared are now more important than ever.