An article relevant to the tax year 2020/21
How to save Stamp Duty Land Tax through chattels
In this article, we will answer the following question from landlords about reducing Stamp Duty Land Tax by identifying chattels
You may be interested in our main article “buy to let tax for UK landlords”. This article discusses all the different types of tax that you need to be aware of as a UK landlord.
We have written an article that shows what Stamp Duty Land Tax is and how it is calculated.
What is a chattel?
HMRC defines the word ‘chattel’ as a legal term meaning an item of tangible, movable property – something you can both touch and move. Your personal possessions will normally be chattels.
- items of household furniture
- paintings, antiques, items of crockery and china, plates and silverware
- items of plant and machinery not permanently fixed to a building (Moveable kitchen and bathroom units)
Chattels are not fixed or a part of the land that it sits on. Chattels may be moved from one place to another. As such these items are not subject to Stamp Duty Land Tax.
How are chattels identified?
Chattels will be identified by the buy and seller of a residential property. The buyer/seller may have a conversation of what items are to be left in the property.
For example, Sarah walks around the property and agrees to dispose of the living room and bedroom furniture. Sarah likes the look of the curtains and carpets and agrees with the seller for them to be left in the property.
Sarah and the seller agree that the value is circa £20,000.
Download your buy to let tax guide here, written by our property accountants
How does Stamp Duty Land Tax get reduced when chattels are identified?
The conveyance solicitor would take the value of the chattels and reduce the land and building costs as follows
£300,000 total price
£20,000 less the agreed price for chattels
£280,000 is the land and building value for Stamp Duty Land Tax purposes.
We wrote an article that demonstrated how Stamp Duty Land Tax was calculated on a £300,000 residential buy to let property. The £300,000 buy to let property had a Stamp Duty Land Tax charge of:
£9,000 – 3% SDLT higher rate X £300,000 purchase price of the buy to let
£5,000 – Scaled Stamp Duty Land Tax charge from above
£14,000 is the total SDLT charge applied to a £300,000 residential buy to let property.
The property is now agreed to have a value of £280,000. This is the original £300,000 value less the £20,000 chattels. Stamp Duty Land Tax is now calculated as follows:
£8,400 – 3% SDLT higher rate X £280,000 purchase price of the buy to let
£4,000 – Scaled Stamp Duty Land Tax charge
£12,400 is the total SDLT charge applied to a £300,000 residential buy to let property.
This simple technique to identify a chattel can save you a lot of Stamp Duty Land Tax. In this example, the identification of just £20,000 worth of chattels saved £1,600.
This is money that is needlessly paid to HMRC.
If you want to know more then please read our “buy to let tax tips for UK landlords” article
How can our property accountants help you reduce your buy to let tax?
Book a call to discuss our property accountancy services
Book a tax call with our property tax specialists using the code “Art25” to get 25% discount