Is There Stamp Duty On Commercial Property?

Stamp Duty Land Tax (SDLT) – most commonly referred to as “Stamp Duty” – is often discussed when buying residential property, but is there Stamp Duty on commercial property too?

The short answer is yes. 

In short, Stamp Duty is a one-off tax that applies to all commercial property transactions over £150,000 – when either purchasing or renting – involving land and properties throughout England and Northern Ireland. Although, how much Stamp Duty you will pay is entirely dependent on a number of different factors, including purchase price and lease term, for example. Read on to find out all about the Stamp Duty rates on commercial property when purchasing or renting. 

How much is Stamp Duty on commercial property purchases?

When purchasing a commercial property, the amount of Stamp Duty payable is calculated based on the purchase price on a sliding scale. This is as follows:

• For purchases up to £150,000 there is no SDLT payable
• The portion from £150,001 to £250,000 attracts a rate of 2%
• The portion above £250,000 attracts a rate of 5%

Photo credit: Chokniti Khongchum / Shutterstock

How much is Stamp Duty on commercial property leases?

When renting commercial property, the amount of Stamp Duty payable is calculated based on several different variables, such as the length of the lease term, the annual rent, and any premium paid for the lease. As a general rule, Stamp Duty whilst renting a commercial property is calculated based on the following rates:

• Up to £150,000 there is no SDLT payable
• The portion from £150,001 to £5,000,000 attracts an SDLT rate of 1%
• The portion above £5,000,000 attracts an SDLT rate of 2%

Stamp Duty and VAT on commercial property

If VAT is payable in addition to the purchase price, then the SDLT is calculated based on the entire sum that is payable on the property purchase. For instance, a property that is being purchased for £1,000,000 plus VAT at 20% – giving a total purchase price of £1,200,000 – would have the SDLT calculated at the price of £1,200,000. In effect, this is a double taxation on the purchaser of the property, so this is something to bear in mind when investing in commercial property.

The government have a Stamp Duty calculator which can assist you in working out what your tax liability will be on a commercial property transaction.

Feature image credit: stockyimages / Shutterstock