Commercial property stamp duty and land tax

This guide provides an overview of how to calculate the amount of stamp duty and land tax you should pay on commercial property.

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How much is commercial property stamp duty and land tax?

Stamp duty and land tax (SDLT) on non-residential and mixed-use land and property is paid in increasing amounts dependant on the escalation of property price. SDLT starts on property prices in excess of £150,000, although SDLT returns should be completed on most transactions, irrespective of the consideration value.

Non-residential properties include:

  • Retail premises
  • Land
  • Forestry
  • Industrial
  • Any land or premises not used or intended for residential purposes
  • Or more than 5 residential properties bought in a single transaction.
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SDLT starts on non-residential properties over £150,000 in value

How to calculate Stamp Duty and Land Tax

Freehold sales and transfers

Property of lease premium valuationSDLT percentage
Up to £150,0000%
£150,001 - £250,0002%
Over £250,0015%

For example:

A freehold mixed-use premise is purchased for £300,000

  • First £150,000 at 0% = £0
  • Next £100,000 at 2% = £2,000
  • Last £50,00 at 5% = £2,500
  • Total SDLT due = £4,500

Transfers and new leasehold sales

If you buy a new commercial or mixed-use leasehold, you must pay the stamp duty on a combination of:

  • The purchase price of the lease premium (price of lease purchased) using the same calculations as if it were a freehold (as above)
  • The total value of the agreed annual rent, the ‘net present value’ which can be calculated using the table below.
  • Calculate both figures separately and add together to give you the SDLT figure owing.
Net present valueSDLT percentage
Up to £150,0000%
£150,001 - £5,000,0001%
Over £5,000,0012%

If you take over an existing or assigned lease the SDLT is only calculated on the lease price.

The net present value (NPV) is based upon the rent over the entire lease period. Should the NPV fall below £150,00 then no SDLT is due.

Current rates apply for transactions after March 17th, 2016. If contracts were exchanged before this date, then different rates of SDLT will apply.

When you have calculated the correct rates, enter this onto your SDLT return and submit it to HMRC.

References

Disclaimer

The content in this post is for informational purposes only and is not intended to replace legal or specialist advice. Before making any decisions we recommend you seek professional advice.

Sarah Raeburn

Head of Marketing

Sarah is head of marketing at HARNESS. She’s been writing articles and content for marketing and communications for over a decade, and has a particular passion for property.