Tax treatment comparison

• A. If HMRC deems it residential (second home):
  SDLT = £40,000
  This includes the 5% residential surcharge.

• B. If correctly classified as mixed use:
  SDLT = £14,500
  (using commercial rates and no surcharge). Mixed-use

A saving of £25,500 by securing the correct mixed-use classification.

Why the saving

• Lower commercial rate bands (max 5%).
• No additional property surcharge.
• Higher nil rate threshold for commercial (£150,000) vs residential (£125,000).

When Classification is not mixed-use

Classification depends on the genuine nature of use at completion; robust evidence and proper legal analysis are required.

Corporate purchase

Consideration should be given to purchasing property through a company owned by a family trust or adult children. If the property is mixed use, the company also pays commercial SDLT rates (0%, 2%, 5%). SDLT: £14,500 (same as individual mixed use).

There may be other benefits of using a corporate structure. Our guide on purchasing property gives a high-level overview of the advantages and disadvantages of owning a property in your own name or using a corporate structure while considering succession planning to integrate. 

Another similar example

 The above is also the case for residential property, which is accompanied by land.
An estate purchase involving a home and other property, such as cottages and office/stables.

Inheritance Tax

Often, it can be favourable to own part of the acquisition in a company, whereas the residential aspect is by the individual. Subsale relief can be helpful, so double SDLT does not become payable on the transfer of land to a corporate.