Stamp duty is a tax you pay when purchasing a property in England and Northern Ireland. If you purchase a property in Wales, then you may have to pay another type of tax called Land Transaction Tax. In Scotland, you may have to pay Land and Buildings Transaction Tax.
This article explains what stamp duty is and how much you might pay on a commercial property.
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax imposed by the UK government on transactions involving the purchase or lease of land and property. It applies to both residential and commercial properties but operates under different rules and rates for each category. The amount of stamp duty payable depends on the value of the property and various other factors.
Do you pay stamp duty on commercial property?
You will need to pay stamp duty on any commercial property that is above the threshold of £150,000. The stamp duty you pay differs from residential stamp duty, with a lower threshold and different rates in place.
Calculating stamp duty on commercial property
The calculation of stamp duty on commercial property is based on a tiered system, similar to that used for residential property but with different thresholds and rates.
The following rates apply for a commercial property:
- £0 - £150,000 = 0%
- £150,001 - £250,000 = 2%
- £250,001+ = 5%
For example on a property worth £500,000, you would calculate the stamp duty like this:
£150,000 taxed at 0% = £0.0
£150,000 to £250,000 (£100,000) taxed at 2% = £2,000
£250,000 taxed at 5% = £12,500.
£12,500 + £2,000 = £14,500
£14,500 total stamp duty to pay.
It's important to note that these rates may vary for specific circumstances, such as if the property is purchased by a company, or if multiple properties are being purchased as part of the same transaction.
What counts as a commercial property?
A commercial property can be classified as a non residential property. Here are some examples:
- Offices
- Shops
- Retail spaces
- Mixed use, e.g. a flat connected to a shop
- Warehouses
- Factories
- Agricultural land
What doesn’t count as a commercial property?
Any residential properties, whether it's one you personally live in, or a buy to let, do not count as commercial property.
Stamp duty relief
Certain transactions may be eligible for relief from paying stamp duty on commercial property. This relief can offer significant savings, so it's worthwhile checking if you could be eligible.
Some examples of transactions eligible for stamp duty relief include:
- Certain leases, such as those with low rents or involving agricultural land, may also be exempt.
- Companies within the same group can claim relief if both the buyer and seller are members of the same group at the transaction's effective date.
- Charities may also be eligible for relief, provided they meet specific conditions.
You can find out more details on what the main reliefs are from the government website.
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