In this brief guide, we are going to discuss stamp duty on commercial property
Do you pay Residential or commercial stamp duty?
You may be wondering if the property you are about to acquire will qualify for residential or none residential (commercial) stamp duty. The basic rule is that the residential rate of Stamp Duty Land Tax will only apply if the land that is being acquired (under one bargain) consists of entirely residential property. If your property doesn’t fit this description then it is likely a commercial property and you will need to pay stamp duty rates for commercial property on it.
Stamp duty on commercial property
Stamp duty is a tax charged on all property transactions in the UK which meet the minimum threshold based on the property type. You will usually have to ay stamp duty at the end of a property purchase usually within 30 days of completion if not you risk a fine from HMRC. Stamp duty is charged on both commercial and residential properties and there are stamp duty reliefs which you may be eligible for.
When you buy a commercial property you may be eligible for stamp duty on that property.
Stamp duty rates on commercial property
The stamp duty rates on commercial property are as follows:
|Commercial property purchase price||Stamp duty rate|
|Up to £150,000||0%|
|Anything between £150,001 to £250,000||2%|
|Anything above £250,000||5%|
The stamp duty rates above are payable on commercial property, this could include:
6 or more properties bought in a single transaction
And generally, any property which is not completely used as a residential unit. This means if you have any mixed-use properties then you will have to pay the stamp duty on it as a commercial property. Example: A flat connected toa shop
If you buy a freehold commercial property for £500,000, the SDLT you owe is calculated as follows:
0% on the first £150,000 = £0
2% on the next £100,000 = £2,000
5% on the final £250,000 = £12,500
Total SDLT = £17,500
Stamp duty on a commercial leasehold property
Stamp duty is also chargeable on new commercial Leasehold Properties. If you buy a new commercial leasehold property then you will have to pay stamp duty on:
The commercial property purchase price based on the freehold stamp duty on commercial property rates in the table above.
You will have to pay stamp duty on the value of the annual rent which you will pay- this is known as the net present value. If you buy an existing (“assigned”) lease, you won’t have to pay stamp duty on the net present value, you will only pay Stamp duty on the lease price (the “Consideration”).
To calculate stamp duty on the Net present value of a new commercial leasehold property, use the table below:
|The net present value of rent||The stamp duty rate on a commercial leasehold property|
|Anything between £0 to £150,000||0%|
|Anything between £150,001 to £5,000,000||1%|
|Anything above £5,000,000||2%|
The above will be calculated separately then added together to give you your stamp duty cost on a commercial leasehold property.
Commercial stamp duty calculator
If you are still confused on what stamp duty you may have to pay on a commercial property then you should consider using a commercial stamp duty calculator.
A commercial stamp duty calculator will let you know what your stamp duty obligations maybe but these calculators should not be your only option. You may want to seek independent financial advice.
Commercial Stamp duty relief
Some commercial property transactions may be eligible for commercial stamp duty relief but this is all based on a variety of factors such as the type of entity you are etc
Types of commercial stamp duty relief
If the property is owned by a company within the same group as the purchaser on the date of the transaction, Stamp duty will not be payable.
Charities can get relief from Stamp duty when they buy land and property for charitable purposes. There may also be partial relief if the purchase is made jointly with a non-charitable entity. HMRC can withdraw the relief if the property reverts to non-charitable use or the charity’s charitable status cease within 3 years of the transaction.”
There may be other stamp duty reliefs available on commercial property as this is not a complete or up to date list.
FAQs: Stamp duty on commercial property
Do you pay stamp duty on a commercial property?
Yes, you pay stamp duty on a commercial property but the rate you pay will depend on the type of purchase you make. The threshold from which you will begin to be liable for stamp duty on a commercial property is £150,000.
Is LBTT payable on commercial property?
Yes, you will have to pay LBTT on a commercial property purchase but how much you pay will depend on a variety of factors and what tax band the purchase falls within.
Do companies pay stamp duty?
Yes, companies have to pay stamp duty on properties hey purchase. Landlords who buy properties through a company that holds at least 15 homes will be able to avoid the extra stamp duty charge.
In this brief guide, we discussed stamp duty on commercial property. If you have any questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.