Stamp Duty for limited companies
Stamp Duty for limited companies is a complex area that UK landlords must navigate with care.
Stamp Duty Land Tax (SDLT) is charged 15% on residential properties costing £500,000 and over.
HMRC defines these non-natural persons’ as companies, partnerships and collective investment schemes.
The 15% SDLT rate does not apply to property bought by a company acting as a settlement trustee.
This SDLT rate is also exempt for companies that purchase properties for a property rental business, property developers and traders, property occupied by employees, a housing co-operative, farmhouses, and financial institutions buying property in the course of lending.
These exclusions are subject to specific conditions.
There is a 3% surcharge on residential properties bought by companies.
What are the basics of Stamp Duty for limited companies?
As property accountants serving thousands of UK landlords that purchase buy-to-let properties, we know that SDLT can be an uncertain topic.
SDLT is a tax charged on the purchase or acquisition of property or land over a certain price in England and Northern Ireland.
Stamp Duty tax works differently if the property or land is in Wales or Scotland.
Where a property is a second property and costs more than £40,000, the SDLT rate will be 3% above the standard rates.
Non-resident companies or companies controlled by non-residents pay a 2% surcharge on all properties over the £40,000 purchase threshold.
If the company is purchasing an additional property, higher rates of SDLT apply.
Landlords will pay an additional 3% above the standard SDLT rates where they already own a property.
Stamp Duty does not apply to purchases under £40,000 or caravans, motorhomes and houseboats.
A limited company will pay the 3% Stamp duty surcharge on any residential property over £40,000.
This applies irrespective of whether or not it is the first property purchased by the company.
All non-residential and mixed-use properties purchased by a limited company pay standard SDLT rates.
There is no 3% Stamp Duty surcharge on non-residential properties for limited companies.
Do limited companies pay a surcharge on BTL properties?
The 3% SDLT surcharge was announced in 2015 and implemented in April 2016.
The 3% Stamp Duty automatically applies to any limited company purchasing a property.
This was designed to target purchasers of second homes and property investors.
What Stamp Duty rates do limited companies pay?
From 01 October 2021, limited companies, second homeowners and buy-to-let investors all pay a 3% Stamp Duty surcharge on top of residential SDLT rates.
The SDLT rate for properties up to £125,000 is 3%.
The SDLT rate for properties up to £250,000 is 5%.
The SDLT rate for properties up to £925,000 is 8%.
The SDLT rate for properties up to £1.5m is 13%.
The SDLT rate for properties over £15.5m is 15%.
It is also worth reviewing the higher rates of SDLT.
Here are Stamp Duty rates for property investors.
Do limited companies pay less Stamp Duty?
Form April 2020 if you owned a buy-to-let property in your personal capacity you would no longer be able to offset the mortgage interest payments as an expense against rental income in your self-assessment tax return.
This is not the same for limited companies that hold property.
Mortgage interest payments remain an allowable expense to reduce profits and corporation tax.
However, a limited company will still be liable to pay the 3% SDLT surcharge where a property costs over £40,000.
You will need to pay conveyancing and also potentially mortgage transfer costs.
A limited company pays the same Stamp Duty rate as an individual for non-residential property.
Here are some ways to reduce Stamp Duty as a property developer.
Can a limited company claim back Stamp Duty?
You can only claim back Stamp Duty as a limited company if you are eligible for a refund.
You may be able to claim an SDLT refund if you purchased a new main residence without selling your previous residence but then sold that previous residence within three years.