How does Stamp Duty work on Commercial Property? Advice from Specialists

Contrary to what you might think, Stamp Duty doesn’t just apply to residential properties; it’s also an important consideration for those buying or renting Commercial Property.

In her first article for the firm, Partner Sarah Heath outlines how stamp duty works for commercial property.

Is there stamp duty to pay on a commercial property?

Yes, Stamp Duty Land Tax (SDLT), often shortened to just ‘stamp duty’, is not only payable on residential properties but it also applies to commercial property.  HMRC class property as either residential or non-residential.

The amount of Stamp Duty you pay depends on the type of property and the ‘value’ of the associated transaction.  This may not be simply the purchase price paid.

How does stamp duty work on commercial property?

In England and Northern Ireland, you pay no stamp duty on the first £150,000 on a commercial property transaction.

Beyond that, you pay 2% on the next £100,000 and 5% on properties over £250,000.

For example, a £350,000 commercial property falls within the 3rd category, as it costs more than £250,000, and you would have to pay stamp duty at 5%.

In addition, a 3% surcharge can also be payable if you are a non-UK resident/foreign registered company.

Please be aware that stamp duty rates are often adjusted.

How much is stamp duty on commercial leases?

Where a commercial property is being rented, stamp duty is calculated based on the length of the lease, the amount of rent payable and if there was a premium paid for the lease. 

You can use the Government’s Stamp Duty calculator to find out how much stamp duty you will be paying, here.

Be careful thought as the VAT treatment of the property may also affect the stamp duty payable.

Is stamp duty more for a commercial property?

Whether stamp duty is more expensive for commercial property than it is for residential property depends on the price.

For example, if your commercial property is between £150,001 and £250,000; you pay 2% stamp duty. But stamp duty isn’t applicable up to £250,000 on residential property.

5% stamp duty is payable on properties over £250,000 in both residential and commercial properties. However, residential homes worth between £250,001 and £1.5m attract 10% tax; with 12% payable on homes above £1.5m.

Commercial stamp duty is capped at 5%.

In the full article, Sarah outlines stamp duty rates for buy to lets and which properties are exempt from paying. You can read the article here.

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