Want to buy a commercial property? Wondering is there a stamp duty on commercial property? The quick answer is yes, you need to pay SDLT on commercial property. Likewise residential property, you need to pay a one-time stamp duty land tax on commercial property transactions worth over £150,000.
This tax is payable whether you are purchasing or renting land or property in England or Northern Ireland. How much you will pay will depend on multiple factors (like lease term and purchase price). SDLT on commercial property can be confusing due to its complex rules. So read on this simple blog till the end to learn more about it.
Understanding Stamp Duty Land Tax
Stamp Duty Land Tax is a tax levied on you whenever you buy a piece of land or property in England or Northern Ireland, even if it’s a small part or a share. This tax differs in Wales and Scotland. For residential property, it starts onward from £125,000 and for commercial and multi-use property, you need to pay for the transactions over £150,000.
Examples of Non-Residential or Commercial Property
Examples of non-residential or commercial properties are:
- Property that isn’t suitable to be lived in
- Shops or offices (commercial property)
- Land or property that is not part of a dwelling’s garden or grounds
- Land used for working farm or agricultural reasons
- Six or more residential properties purchased in a single transaction
Rates of Stamp Duty On Commercial Property
SDLT is payable based on a sliding scale of the property price. The rates for freehold sales and transfers of SDLT are as follows:
- Upon the purchases up to £150,000, you don’t need to pay any SDLT
- 2% SDLT is payable on the portion from £150,001 to £250,000
- 5% SDLT is payable on the amount of purchase over £250,000
Upon buying a freehold commercial property for £275,000, the SDLT you need to pay will be:
- 0% on the first £150,000 = £0
- 2% on the next £100,000 = £2,000
- 5% on the final £25,000 = £1,250
- Total SDLT = £3,250
Stamp Duty on Commercial Property Lease
You pay SDLT when you buy a new non-residential/mixed leasehold on the purchase price of the lease and on the value of annual rent you pay, plus any premium paid for the lease. These are separately calculated then added together. The net present value is based on the total rent over the lease tenure. Note that there is no SDLT payable on the rent if NPV (net present value) is below £150,000. Here is the table that shows how much you pay as per the net present value of net:
According to HMRC, there is no SDLT payable or you don’t need to file a return if:
- property is left to you in a will
- you buy a freehold property below £40,000
- no money or other payment changes hands for a land or property transfer
- there is a transfer of property due to divorce or dissolution of a civil partnership
- you buy a new or assigned lease below 7 years, as long as the amount you pay is less than the residential threshold or non-residential threshold of SDLT
- you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
- you use alternative property financial arrangements (for example, to comply with Sharia law)
To get SDLT reliefs, you need to be buying your first home or there are certain other situations where you can apply for the relief. This relief will cut down the amount of tax you pay. Bear in mind that you must complete SDLT return to claim any relief (even if no tax is due).
For more details, you can visit the HMRC website.
Quick Sum Up
To sum up the discussion of stamp duty on commercial property, you now know that SDLT is payable on the purchase of commercial property transactions over £150,000. Additionally, you are also liable to pay SDLT on leasehold commercial property. There are many reliefs and exemptions available to mitigate your SDLT. In this regard, the professional help of our accountants is just a click away.
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Disclaimer: This blog is just for your general information SDLT on commercial properties.