Top 100 Tips for Business – #7 Stamp Duty Changes


There has been plenty of furore around the Stamp Duty Land Tax (SDLT) changes which were introduced in April 2016.

They’ve resulted in residential buyers and investors alike facing significant increases in the cost of purchasing property.

However, for investors there is a little-lauded opportunity to still maximise the value on your real estate purchases.

New Stamp Duty thresholds explained

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Of course, this means that for investors, any property bar the very cheapest now attracts a significant tax levy of three per cent, unless whatever you are buying will replace your main residence.

A largely untapped opportunity

What a lot of investors don’t realise, though, is that mixed-use properties – for example an office or shop with a flat above – only attract commercial stamp duty rates, which are significantly lower.

Here’s a flavour of the difference this could make to your upfront purchase costs:
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So you can start to see how it might make commercial sense to widen your horizons, in terms of the kind of property you decide to invest in. If you compare the costs for a £100,000 property, purchasing a mixed use one would save you £3,000 in upfront costs because stamp duty doesn’t kick in until the £150,000 mark.

Not the only reason to think outside the residential box

There are, of course, other reasons why considering a mixed-use property makes commercial sense. Not least the fact that you can potentially make more income from it – imagine a flat over a shop where you are charging monthly rent on both elements.

Commercial leases also tend to be longer, spanning five-to-10 years rather than the six-month shorthold tenancies that are typical for residential properties. This means that once you’ve found the right tenants, you potentially benefit from longer term certainty. There are also potential tax benefits, in that you can offset capital allowances for the purchase price and any fixtures and fittings against your taxable income. Dealing with business tenants can also be much less stressful, as there is typically less emotion involved.

6 important things to consider before deciding which kind of property to plump for

  1. Because you’ll need commercial finance to buy your property, you might have to pay a higher interest rate than for a residential one, or only be able to secure a mortgage for a shorter overall term. You’ll also have business rates to pay if the property is empty, and it would be wise to check with your local authority how much these will be before you buy. Obviously, if you let the property out, then you pass the liability of the business rates to the tenants.
  2. You might also be required to put down a higher deposit up front, so you need to make sure you have the capital means to do that
  3. You’ll need to make sure any commercial property you purchase complies with Disability Discrimination Act access guidelines, and it’s important to check this out up front or you could face a significant revamp bill
  4. You’ll also have to keep stringent records, including a health & safety file, because your property will be used by more members of the public than if it were let just to one person or family
  5. And you’ll need to have a really robust contract. Commercial lets are a bit more complex than residential ones. Given your lease is likely to be a longer one, you need to make sure you have the right to reclaim your property earlier if you need to. You also need to agree who is responsible for the maintenance – are you going to do it or will you make it a clause that your commercial tenant takes care of such things?  Whoever does it, which specific areas will each be responsible for? You’ll also need to make sure you have the relevant buildings insurance cover – and because the building will be used partly for commercial purposes you might need public liability insurance too. Usually, with the commercial element of your lease, you will be able to pass the costs and responsibilities associated with lease documentation, maintenance and insurance on to your tenant – as well as ownership for meeting regulatory requirements around everything from health and safety to asbestos removal. However, this needs to be clearly specified in writing
  6. Choosing the right area to purchase in is always important when it comes to residential properties, such as nearby amenities, crime rates, local rental market performance and monthly rental yield rates. However, there are additional considerations you need to take into account for any commercial property.  Not least, the fact that anyone choosing to take over the property will need to feel it’s a good area to establish a business in. So, it’s worth doing your own viability analysis before you purchase, looking at the types of businesses already in the area and whether they are thriving, footfall and visibility around the property you’re thinking of buying, and rental yields. Get feedback from other traders to help inform your decision and make sure you’re confident that the area will ultimately appeal to business owners.

A good time to invest in property in Hull

As outlined in our recent guest blog from Darren Peacock of Peacock Finance, Hull is being badged as THE property hotspot for local and out-of-town investors, due to its relative cheapness and the positive PR surrounding Hull, City of Culture 2017. Not only is that good news for residential property lets, but the hundreds of thousands of visitors and business investors pouring in also means there is a shortage of commercial property and serviced accommodation.

We are seeing a significant uplift in the number of property transactions we’re dealing with on a weekly basis, from across the UK and internationally, as well as locally. There is certainly something afoot in our city and – although no-one should ever ‘go into’ property lightly or for the short term – we’d say it is certainly a route worth considering if you have spare capital to invest for short term income and longer term growth.

Top tip:

Always seek expert legal and accountancy advice before deciding to take the plunge. This will almost certainly protect you from falling foul of avoidable stumbling blocks and added costs later on.

If you’re thinking of investing in property and could do with an initial chat about the right avenues to follow, or even sense check a plan you have to purchase a particular property, why not give me a call on 01482 974 510, or email me at

Check out our James Legal – The Business 2017 campaign, for more useful insights from James Legal and our expert partners; access to free business masterclasses and the chance to win one of two prizes together worth more than £39,000.

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