Are there financial advantages to buying property with land? Mixed use stamp duty
 

Those that crave land do so for a variety of reasons including additional privacy, a space in which their children can play, land for their horses or dogs, as a means to raise some income and it can be a way to reduce stamp duty as long as there is a mixed use to your property.

At the end of 2015, major changes to the way stamp duty was calculated came into effect. The changes mean that purchasers may be able to reduce their stamp duty liability depending on the use of their property.

The new legislation brought with it a new banding system:

• Up to £125,000 exempt
• The next £125,000 (the portion from £125,001 to £250,000) - 2%
• The next £675,000 (the portion from £250,001 to £925,000) - 5%
• The next £575,000 (the portion from £925,001 to £1.5 million) - 10%
• The remaining amount (the portion above £1.5 million) - 12%

However, there is a way to pay only 5%...if your property has a mixed use.

What does mixed use mean, and does it apply to you?
Mixed use refers to a property that has both residential and non-residential elements, including commercial property, agricultural land, forests, any other land or property which is not used as a residence such as an office, or six or more properties bought in a single transaction.

How could this save money?
Here are a few examples, featuring some of our Cheshire properties currently for sale:

Cogshall Hall is an exceptional Estate with an elegant Grade II* Listed country house and extensive secondary accommodation, nestled in about 68 acres of gardens, park and farmland.

The guide price is £12,500,000. As the property is in the highest stamp duty tax band, potential purchasers could be been liable for 11.3% stamp duty (around £1,413,750). However, as a proportion of the property’s land is rented out to a local farmer for cattle grazing (mixed use), buyers should pay only 5% in stamp duty (around £625,000) – an impressive saving of £788,750. This is of course subject to acceptance by HMRC.

Brereton Hall, Brereton, Cheshire is a magnificent Grade I listed mansion in a lovely rural location with far reaching views. Brereton Hall includes four reception rooms, 12 bedrooms, ten bathrooms, extensive domestic offices, separate offices, gardens and pastureland of around 116 acres.

With a guide price of £5,950,000 stamp duty would be calculated at around £627,750 (10.55%). As the property is mixed use a buyer should only pay £297,500 (5%), making a saving of around £330,250. This is of course subject to acceptance by HMRC.

Butterlands Farm in Wincle, Macclesfield is a small Estate with two substantial houses, extensive equestrian facilities, farmland and outbuildings, standing in about 115 acres, within the Peak District National Park. Butterlands Farm is a registered agricultural holding and has been farmed commercially for many years.

With a guide price of £2,150,000 stamp duty would be calculated at £171,750 (8%). As the property is mixed use a buyer should only pay £105,500 (5%), making a saving of £66,250. This is of course subject to acceptance by HMRC.

Deansgreen Hall in Lymm is one of Cheshire's finest country houses (approximately 20,000 sq ft), with magnificent leisure and 5,588 sq ft luxury garaging/hangar facility, including a 22 car garage. Part of the buildings are let out on a commercial lease to a car logisitcs company, which provides the mixed use element to this property.

It features five reception rooms, cinema room, games room, music room, study, orangery, eight bedrooms (all en suite), leisure suite with indoor pool and gym, integral staff flat, three bedroom lodge and extensive outbuildings.

With a guide price of £6,000,000 stamp duty would be calculated at £633,750 (10.56%). As the property is mixed use a buyer should only pay £325,000 (5%), making a saving of £308,750. This is of course subject to acceptance by HMRC.

Properties with land
Purchasing property with land that can be rented out not only brings in a regular income; it may bring large savings on stamp duty liability, making it an attractive proposition – even for those that may not be interested in owning acres of land. It’s definitely food for thought.

These are illustrated examples. Anybody looking to purchase a property would need to take specific legal and tax advice in relation to stamp duty policy.

Did you know that we are the number 1 agent for selling properties worth over £1 million in SK9 and SK10?

For more information on mixed use stamp duty, advice on buying or selling your home, or on any of our Cheshire properties for sale please do contact our Wilmslow office on 01625 540340 or email wilmslow@jackson-stops.co.uk.