Land tax is a significant consideration when purchasing residential property in the United Kingdom. However, various relief options are available to residential buyers, offering potential savings and reducing the financial burden. 

The main reliefs available are:

• First-Time Buyer Relief: provides a reduced rate or complete exemption for individuals purchasing their first residential property below a specific value threshold.

• Multiple Dwellings Relief:  offers a different calculation method that can lead to a lower overall SDLT liability compared to purchasing each property individually. It is particularly beneficial for property developers or investors acquiring multiple dwellings simultaneously.

• Uninhabitable Dwelling Relief:  At the date of completion, where a dwelling entirely lacks basic living facilities (for cooking, cleaning and sleeping) and/or is structurally defective or too dangerous to live in, this transaction is treated as a non-residential for land tax purposes.

• Main Residence Replacement Relief: applies where a purchaser replaces one main residence with another by selling their previous main residence.

• Mixed Use Property Relief:  For a building containing an area used as a dwelling and an area used for business purposes, depending on the facts, this transaction is treated as a non-residential for land tax purposes.

• Relief for Transfers of Land to Charities: It is available for transactions involving transfers of land to registered and non-registered (e.g. schools, colleges and universities) charities. It provides full land tax exemption or a reduced SDLT rate depending on the circumstances.

• Groups of Companies Relief:  Exemption from land tax is available for bona fide transfers between body corporates which are members of the same group.  The 75% ownership test must be met.

• Property traders Probate Relief:  land tax is exempt if a property trading company acquires a dwelling from the personal representatives of a deceased individual, if certain conditions are met.  

• Shared Ownership SDLT Relief: This relief allows individuals to acquire an initial share of a home and pay rent on the remaining portion to increase through their ownership, also known as staircasing.

• Right to Buy Relief: applies to the sale of a residential property by a public sector body at a discounted price.

• Employer Relief: applies where an employee sells their main residence to their new or existing employer because they need to relocate for work.

• Broken Chain Relief: applies where a property trading company saves a chain from collapsing by purchasing someone’s main residence

• Sub-Sales and Assignment of Rights:  There is land tax relief when an initial purchaser enters into a contract with a 3rd party to transfer or sell an interest in the property, before the original contract is completed or substantially performed.  

• Sale and Leaseback Transactions: Relief is available on the leaseback element if an arrangement under which:  A transfers or grants to B a major interest in land, (the sale), and out of that interest B must grant a lease to A (the leaseback).

• Transactions between Spouses/Civil Partners:  Generally there is no special land tax treatment and the land tax charge is consideration-based.  However, any transfers in connection with or in contemplation of divorce or judicial separation are exempt from SDLT.

• Incorporation of a Partnership into a Limited Company:  Usually there is a land tax charge on the market value of land/buildings, when an individual transfers it to a connected company.  There are special calculative rules which discount the level of consideration subject to land tax when a partnership is incorporated.
  

Each relief has its own specific eligibility criteria and conditions. As the availability of relief categories may be subject to change, we recommend that you speak with a Mirador tax specialist for the most up-to-date information and guidance regarding land tax relief.