What is the 15% SDLT rate for companies buying residential property?

Where a company (or other non-natural person) purchases a residential property for £500,000 or more, SDLT may be charged at a flat rate of 15% on the entire purchase price, subject to certain exemptions. The 15% SDLT rate applies to purchases of residential property by non-natural persons (companies, partnerships with company members, and collective investment schemes) where the consideration is £500,000 or more. The rate is charged on the entire purchase price, not just the amount above £500,000. However, there are important exemptions: properties purchased for property development, for use in a property rental business, for use as employee accommodation, and for use in a trade may be exempt. The 15% rate is in addition to, not instead of, the 5% additional dwelling surcharge. Relevant legislation: Schedule 4ZA Finance Act 2003, Paragraph 6 (15% rate for non-natural persons); SDLTM09850 HMRC Manual. Example: A company purchases a residential property for £2 million. Without any exemptions, SDLT at 15% = £300,000. If the property is purchased for a property rental business and the exemption applies, SDLT at standard residential rates with the 3% surcharge = £153,750. The exemption saves £146,250. Common mistake: Not claiming an available exemption from the 15% rate, resulting in SDLT being charged at 15% instead of the standard residential rates.

What is ATED and when does it apply?

ATED (Annual Tax on Enveloped Dwellings) is an annual tax payable by companies that own residential property valued at more than £500,000. The tax ranges from approximately £4,200 to £28,140 per year (2024/25 rates). ATED is an annual tax on companies (and other non-natural persons) that own residential property valued at more than £500,000. The tax is charged based on the value of the property, in bands starting from £500,001. The 2024/25 rates range from £4,200 (for properties valued £500,001-£1 million) to £28,140 (for properties valued over £20 million). Certain reliefs are available, including for properties used in a property rental business, property development, employee accommodation, and trade use. ATED returns must be filed annually, and reliefs must be claimed on the return. Relevant legislation: Finance Act 2013, Part 3 (ATED). Example: A company owns a residential property valued at £3 million. The ATED charge for 2024/25 is £9,885 per year. If the property is let on a commercial basis, the property rental business relief may apply, reducing the ATED charge to nil (but the relief must be claimed on the ATED return). Common mistake: Not filing ATED returns or claiming available reliefs, resulting in unnecessary ATED charges and potential penalties.

Are there exemptions from the 15% SDLT rate for companies?

Yes. Exemptions from the 15% rate include properties purchased for property development, for use in a property rental business, as employee accommodation, or for use in a trade. Each exemption has specific conditions. The exemptions from the 15% SDLT rate are designed to target the rate at companies purchasing residential property for investment purposes (property 'envelopment'). The main exemptions are: (1) property development — the company is a property developer purchasing the property for redevelopment and resale; (2) property rental business — the company is a property investor purchasing the property to let; (3) employee accommodation — the property is for use as accommodation for employees; (4) trade use — the property is used in a trade (e.g., a hotel, care home, or student accommodation). Each exemption has specific conditions that must be met, and the company must intend to use the property for the qualifying purpose at the time of purchase. Relevant legislation: Schedule 4ZA Finance Act 2003, Paragraph 6 and related exemptions. Example: A property development company purchases a residential property for £800,000 for redevelopment and resale. The property development exemption applies, so SDLT is charged at standard residential rates (£30,000) plus the 3% surcharge (£24,000) = £54,000, instead of 15% (£120,000). Saving = £66,000. Common mistake: Not identifying which exemption applies before the SDLT return is filed, resulting in SDLT being charged at 15% unnecessarily.

Should I use a company to buy residential property?

It depends on your circumstances. A company structure can offer tax advantages (corporation tax rates on rental income, no higher-rate income tax) but involves SDLT considerations (15% rate, ATED), and extracting profits can be inefficient. Specialist advice is essential. Using a company to purchase residential property has both advantages and disadvantages. Advantages include: corporation tax on rental profits (19-25%) rather than income tax (up to 45%); full mortgage interest relief (unlike individuals, who face restrictions); and potential inheritance tax planning benefits through business property relief. Disadvantages include: the potential 15% SDLT rate (though exemptions may apply); ATED charges; the 2% non-resident surcharge (if applicable); and the cost and complexity of extracting profits from the company. The decision should be made with specialist tax advice that considers the specific circumstances. Relevant legislation: Various SDLT and corporate tax provisions. Example: A higher-rate taxpayer is considering purchasing a buy-to-let property for £600,000. If purchased personally, rental income is taxed at 45% and mortgage interest relief is restricted. If purchased through a company, rental income is taxed at 19-25% corporation tax with full mortgage interest relief, but SDLT may be higher (3% surcharge applies in both cases, and the 15% rate may apply unless a rental business exemption is claimed). Common mistake: Using a company structure without considering the SDLT implications, particularly the 15% rate and ATED. The SDLT cost can outweigh the income tax savings.

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Companies Buying Property & SDLT

Companies purchasing residential property face complex SDLT rules, including potential 15% rates, the 2% non-resident surcharge, and ATED. Get specialist corporate SDLT advice.

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When a company purchases residential property, the SDLT landscape becomes significantly more complex. Companies may face the 15% higher rate on residential property over £500,000, the 2% non-resident surcharge, and the Annual Tax on Enveloped Dwellings (ATED). Understanding these rules and planning transactions carefully is essential to avoid excessive SDLT charges.

The 15% SDLT Rate for Companies

Where a company purchases a residential property for £500,000 or more, and certain conditions are met, SDLT is charged at a flat rate of 15% on the entire purchase price. This is significantly higher than the standard residential rates (which top out at 12%). However, there are important exemptions, including properties purchased for property development, property rental businesses, and employee accommodation.

The 2% Non-Resident Surcharge

Since 1 April 2021, a 2% SDLT surcharge applies to purchases of residential property in England and Northern Ireland by non-UK residents. This applies in addition to the standard residential rates and the 5% additional dwelling surcharge. A non-UK resident company purchasing a residential property could face SDLT at up to 17% (15% + 2%).

Annual Tax on Enveloped Dwellings (ATED)

ATED is an annual tax payable by companies that own residential property valued at more than £500,000. The tax is payable annually and ranges from £4,200 to £28,140 (2024/25 rates). Certain reliefs are available, including for property rental businesses and property developers. ATED should be considered alongside SDLT when a company is purchasing residential property.

Corporate Structuring for Property

There are various SDLT and tax planning opportunities when a company purchases property. The structure of the acquisition — whether through a new company, an existing company, a group structure, or a trust — can significantly affect the SDLT and ongoing tax position. Specialist advice at the planning stage can identify the most efficient structure and avoid costly mistakes.

Key Points

What You Need to Know

Companies purchasing residential property over £500,000 may face SDLT at 15%
The 2% non-resident surcharge applies to non-UK resident buyers of residential property
ATED is an annual tax on companies owning residential property worth over £500,000
Exemptions from the 15% rate include property development, rental businesses, and employee accommodation
Corporate structuring advice should be sought before completing any property purchase

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