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Our specialist partners and teams can provide expert advice on everything from farming and agriculture, to military tax allowances. We’re here to help you make the most of your planning opportunities so that you can grow with confidence.
Buying the house (or small farm?) next door
There are different sets of Stamp Duty Land Tax (SDLT) rates for ‘residential’ and ‘non-residential’ property. The current (September 2024) rates are:
‘Residential’ property
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| ‘Non-residential’ property | ||
First £250,000 | 0% |
| First £150,000 | 0% |
Next £675,000 | 5% |
| Next £100,000 | 2% |
Next £575,000 | 10% |
| Thereafter | 5% |
Thereafter | 12% |
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Plus additional 3% on the whole price for a second or subsequent dwelling |
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‘Mixed use’ property qualifies for the ‘non-residential’ rates.
Traditionally, farm purchases have been accepted as ‘mixed use’ property but, like the SDLT rates, HMRC’s stance has toughened in recent years and their current guidance asserts that ‘residential’ SDLT rates are often payable on ‘a cottage with fields’.
The legislation provides that land is ‘residential’ for SDLT purposes where it forms part of the ‘grounds’ of a dwelling.
HMRC’s position is that the SDLT status of land is unaffected by its capital gains tax (CGT) status or whether it is necessary for reasonable enjoyment of the dwelling. Instead, the following factors should be considered:
Layout and use: does the land include domestic outbuildings, small orchards, stables or paddocks suitable for leisure or hobby use; or is there good evidence of commercial use over time?
How does the land area compare with the size of the dwelling, and how close and accessible is it?
Are there legal constraints, such as agricultural land classification by the rates office, or lengthy tenancy agreements which prevent the occupier of the dwelling from accessing the land?
Does the land provide amenity for the house, perhaps in terms of setting or view (eg parkland)?
This multi-factorial approach was endorsed in a 2021 Upper Tier Tribunal case [Hyman] and claims for ‘mixed use’ status have failed in several reported cases over recent years. Recent (2024) failed Tribunal cases include Lynch and Holding, both of which concerned large houses with around 20 acres of agricultural land that had been used under informal agreements by neighbouring farmers. In both those cases, the Tribunal concluded that the property purchase was ‘residential’.
Both Lynch and Holding involved very substantial houses and the ‘setting’ provided by their lands was more problematic than usual. Nevertheless, any farmer buying a neighbouring house with a modest acreage should be prepared for the possibility of having to pay ‘residential’ rates of SDLT or should seek expert advice before committing to the purchase.
Our tax specialists would be glad to assist you with SDLT advice and planning, don't hesitate to get in touch.