Mixed-Use Property Classification Cases
Understanding landmark SDLT cases on residential vs non-residential classification and how the April 2025 changes affect mixed-use property claims.
In this article
The classification of a property as residential, non-residential, or mixed-use has dramatic implications for Stamp Duty Land Tax liability. With residential rates reaching 12% and non-residential rates capped at 5%, the difference can amount to tens of thousands of pounds on higher-value properties.
Following the April 2025 SDLT changes—which increased the additional dwelling surcharge from 3% to 5% and reduced the nil-rate band from £250,000 to £125,000—the incentive to claim mixed-use classification has intensified. HMRC has responded with increased scrutiny of such claims.
What is Mixed-Use Property?
Under SDLT legislation, a property is classified as mixed-use if it comprises both residential and non-residential elements. Non-residential elements include:
- •Commercial premises: shops, offices, workshops
- •Agricultural land: farmland, grazing land exceeding permitted garden or grounds
- •Commercial buildings: barns, storage units, workshops used for business purposes
- •Business use areas: parts of the property used wholly or mainly for business purposes
The key distinction is that the non-residential element must be substantial and genuinely used for non-residential purposes. Merely incidental or minimal commercial use is insufficient.
SDLT Rate Comparison
| Property Value Band | Residential Rate | Non-Residential/Mixed Rate |
|---|---|---|
| Up to £125,000 | 0% | 0% |
| £125,001 to £250,000 | 2% | 0% |
| £250,001 to £925,000 | 5% | 2% |
| £925,001 to £1,500,000 | 10% | 5% |
| Above £1,500,000 | 12% | 5% |
Example Saving:
On a £1,000,000 property, the SDLT difference between residential and mixed-use classification is approximately £28,750.
Landmark Classification Cases
Tretyakov v HMRC [2023] UKFTT 00128 (TC)
Issue: Whether a property with a residential dwelling and a commercial storage unit qualified as mixed-use for SDLT purposes.
Decision: The First-tier Tribunal (FTT) confirmed that partial commercial use does not automatically exclude residential classification. The storage unit was found to be incidental to the residential use, and the property was classified as residential.
Key Principle: The non-residential element must be substantial and represent a genuine, ongoing business use. Incidental or ancillary use is insufficient to trigger mixed-use classification.
Storage Unit and Barn Cases
Multiple tribunal cases have addressed whether properties with barns, storage units, or outbuildings qualify as mixed-use:
- ✓Successful claims: Properties where barns or storage units were used for established businesses (e.g., farming, established trade), with clear evidence of ongoing commercial activity
- ✗Failed claims: Properties where storage areas were used for personal storage, hobby purposes, or where commercial use was minimal, intermittent, or started after purchase
Agricultural Land Claims
Properties with agricultural land may qualify as mixed-use if the land is used for farming or similar commercial purposes. Key considerations:
- •Land must exceed permitted garden or grounds (typically 0.5 hectares)
- •Must be used for commercial farming, not personal enjoyment or amenity
- •Evidence required: farming income, business registration, agricultural tenancy agreements
Home Office and Business Use Claims
HMRC has consistently rejected claims based solely on home office use or minor business activities within a residential property:
- ✗Using a room as a home office does not create mixed-use classification
- ✗Self-employment or running a business from home is insufficient without separate commercial premises
- ✗Business rates liability alone does not establish mixed-use classification
HMRC's Approach to Mixed-Use Claims
HMRC has intensified scrutiny of mixed-use claims following the April 2025 changes. The department is particularly focused on:
1. Evidence of Commercial Use
HMRC requires clear evidence that non-residential elements are used for genuine business purposes at the time of purchase. Post-purchase commercial use is irrelevant for SDLT purposes.
2. Substantiality Test
The non-residential element must be substantial relative to the property as a whole. HMRC examines size, value contribution, and functional independence.
3. Ancillary vs Independent Use
Commercial elements that are merely ancillary or supportive of residential use (e.g., garage for personal vehicles, storage for household items) will not qualify.
4. Planning Permission and Business Rates
While relevant, planning permission for commercial use and business rates assessment are not determinative. HMRC examines actual use at the effective date of transaction.
Impact of April 2025 Changes
Before vs After April 2025
| Rule | Before April 2025 | After April 2025 (Current) |
|---|---|---|
| Nil-rate band | £250,000 | £125,000 |
| Residential top rate | 12% | 12% (unchanged but applies from lower threshold) |
| Non-residential top rate | 5% | 5% (unchanged) |
| Additional dwelling surcharge | 3% | 5% |
| Mixed-use incentive | High gap between residential and non-residential rates | Higher gap due to additional dwelling surcharge increase |
| HMRC scrutiny | Increasing | Significantly increased |
Key Change:
The reduction in the nil-rate band from £250,000 to £125,000 and the increase in the additional dwelling surcharge from 3% to 5% have made mixed-use classification even more valuable—but also more scrutinized by HMRC.
Risk Factors for Mixed-Use Claims
High-risk claims likely to be challenged by HMRC:
Minimal commercial element
Small storage areas, single-room offices, or minimal agricultural land
Post-purchase commercial use
Starting a business or converting space to commercial use after purchase
Ancillary or personal use
Storage for personal items, hobby workshops, or personal vehicle garages
Lack of evidence
No business records, income, or clear commercial activity at time of purchase
Home office claims
Claiming mixed-use based solely on working from home
Practical Guidance for Mixed-Use Claims
To support a mixed-use classification claim:
Document commercial use at time of purchase
Gather evidence of existing business activity, tenancy agreements, or agricultural use before completion
Establish substantiality
Demonstrate that the commercial element is significant in size, value, or functional importance
Show functional independence
Evidence that commercial areas operate independently from residential use (separate access, utilities, business operations)
Maintain business records
Keep clear records of business income, expenses, and commercial activity relating to the property
Seek specialist advice
Consult a tax advisor or solicitor experienced in SDLT mixed-use claims before completing the transaction
Important:
If HMRC challenges a mixed-use claim, the burden of proof is on the taxpayer to demonstrate that the property genuinely qualifies. Inadequate evidence can result in additional SDLT, interest, and penalties.
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Calculate Your Stamp DutyEmma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.