Use our commercial stamp duty calculator to instantly calculate the stamp duty (SDLT) payable in England and Northern Ireland.
Our stamp duty calculator
This stamp duty calculator provides you with an insight into your stamp duty liability when purchasing a non-residential or mixed-use property or land.
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What is commercial stamp duty?
Stamp Duty Land Tax (SDLT) is payable when property or land is purchased in England and Northern Ireland. The tax becomes due over a certain price and is charged according to different price thresholds, which we’ll explain below. Commercial stamp duty applies to non-residential properties as well as mixed-use land and property. A mixed-use property contains both residential and non-residential aspects. For example, an office, shop or pub that has a flat above it. Stamp duty is payable whether you purchase a freehold property or a new or existing leasehold property. When buying a property or land in Scotland, Land and Buildings Transaction Tax (LBTT) is payable instead of SDLT. In Wales, Land Transaction Tax (LTT) is charged.
What is classed as non-residential property?
For the purposes of calculating commercial stamp duty, the following non-residential properties fall under the commercial classification:
- Offices
- Retail units
- Warehouses and factories
- Sheds
- Workshops and garages
- Fisheries
- Agricultural land
- Forests
- Mixed-use properties
- Properties that aren’t suitable to be lived in
- Six or more residential properties that have been purchased in one transaction
Agricultural land that’s included as part of a dwelling’s grounds or garden is subject to residential stamp duty rates rather than commercial ones.
What are the commercial stamp duty rates?
Stamp duty is determined by different tax bands, which are known as the SDLT thresholds. For non-residential properties and land, the commercial stamp duty thresholds start at £150,000. This means that for purchases made with a value that falls below this threshold, no commercial property stamp duty is payable. When paying more than £150,000, the commercial stamp duty that’s charged is based on increasing portions of the purchase price. The amount payable also depends on whether the property is freehold or a new leasehold. As well as that, it depends on whether you’re eligible for an exemption or relief.
Commercial stamp duty rates for freehold property transactions
The commercial stamp duty thresholds for freehold transactions are:
- £0–£150,000: 0%
- £150,001–£250,000: 2%
- Above £250,000: 5%
These thresholds can also be used to determine your stamp duty rate for a lease premium.
As an example, if you’ve decided to purchase a freehold commercial property in Pimlico for £450,000, the amount of commercial stamp duty you have to pay is calculated as follows:
- 0% on the first £150,000: £0
- 2% on the next £100,000: £2,000
- 5% on the remaining £200,000: £10,000
This makes the total commercial stamp duty payable for your freehold property £12,000.
Commercial stamp duty rates for new leasehold property transactions
For a non-residential or mixed lease, stamp duty is payable on both the:
- Lease purchase price, which is called the lease premium and is calculated using the rates above
- Annual rent, which is known as the net present value (NPV)
If you purchase an existing lease, stamp duty is only payable on the lease price. The NPV is determined by the total rent over the entire lease. If the NPV is less than £150,000, no stamp duty is payable on the rent. The stamp duty calculations for this are as follows:
- £0–£150,000: 0%
- £150,001–£5 million: 1%
- Above £5 million: 2%
If you make multiple transfers or purchases via the same seller, you may have to pay a higher stamp duty rate.
When do you pay commercial stamp duty?
You have 30 days from the completion of your purchase to pay the commercial stamp duty to HMRC. This is longer than the 14-day requirement for residential stamp duty. Your legal adviser will usually do this for you and include the tax amount in their fees. This ensures that you don’t miss the deadline and incur a fine as a result.
Can you add your commercial stamp duty to your mortgage?
If you’re using a mortgage to finance the purchase of your commercial property, you may be able to add your stamp duty cost to it. This is provided that you pass the affordability checks for the larger mortgage loan that this will entail. Doing so, however, isn’t advisable as not only does your mortgage debt become bigger but your loan-to-value (LTV) ratio may be affected. If the increased stamp duty cost pushes you out of the LTV bracket you’re in, you’ll pay a higher interest rate.
Another consideration is that interest is charged on the loan throughout the mortgage term. This means that you’ll also pay interest on the stamp duty amount that’s added to it. When calculated over the entire term, the extra interest may be significantly higher than the original charge for commercial stamp duty.
When is commercial stamp duty not payable?
Commercial stamp duty isn’t payable on properties that have a purchase price of £150,000 or less. You are also exempt from paying stamp duty if the property you buy has a lease of at least 7 years, a premium that’s under £40,000 and an annual rent of less than £1,000. Other exemptions can apply to stamp duty regarding commercial leases, which you’ll need to confirm with your legal adviser.
Commercial stamp duty in Scotland
Instead of paying SDLT, you pay Land and Buildings Transaction Tax (LBTT) in Scotland. This tax replaced SDLT in Scotland on 1st April 2015. It works in a similar way to SDLT in that tax thresholds apply instead of tax being due for the entire purchase price. The LBTT rates for non-residential properties are:
- £0–£150,000: 0%
- £150,001–£250,000: 1%
- Above £250,000: 5%
The NPV thresholds are also different for LBTT when dealing with a leasehold transaction:
- £0–£150,000: 0%
- £150,001–£2 million: 1%
- Above £2 million: 2%
If the average annual rent is at least £1,000, the nil-rate tax band doesn’t apply to the premium.
Commercial stamp duty in Wales
In Wales, you pay Land Transaction Tax (LTT) instead of SDLT. This tax replaced SDLT in Wales on 1st April 2018. As with SDLT, tax thresholds have been set so that tax isn’t due on the entire purchase price. The LTT rates for non-residential properties are:
- £0–£225,000: 0%
- £225,001–£250,000: 1%
- £250,001–£1 million: 5%
- Above £1 million: 6%
For leasehold transactions, the NPV thresholds are also different for LTT:
- £0–£225,000: 0%
- £225,001–£2 million: 1%
- Above £2 million: 2%
Get expert advice on commercial stamp duty
Before buying your non-residential or mixed-use property or land, use our commercial stamp duty calculator to get an indication of how much you’ll need to pay for this tax. If you have any queries regarding your commercial stamp duty liability, simply give us a call on 01322 907 000. Our mortgage and protection brokers can help you with every part of the purchase process, including guidance on stamp duty. As well as assisting you with any stamp duty enquires, they can arrange the funding for your purchase, such as a commercial mortgage or development finance.
At Trinity Finance, we also offer a range of other services, which include arranging your insurance cover. To find out more, send an email to us at info@trinityfinance.co.uk or an enquiry via our contact form. One of our financial experts will reply to you as quickly as possible with further details of the wide range of commercial services that we can help you with.
FAQs
How does commercial stamp duty differ from residential stamp duty?
The headline rates for stamp duty on commercial property are lower than the rates payable for residential property. Land purchases and transfers for commercial purposes are also included in the commercial stamp duty costs.
Can you benefit from any commercial stamp duty relief?
Yes, commercial stamp duty relief is available in some circumstances. This applies, for example, if you’re buying a property or land in a designated Freeport tax site or an Investment Zone. The property or land must be used for a commercial profession or trade, development for resale or letting to someone for commercial use.
Other reliefs and exemptions are available for stamp duty on commercial properties. These can include, among others:
- Compulsory purchases
- The purchase of a new or assigned lease with a minimum of 7 years that has a premium of under £40,000 and an annual rent that’s less than £1,000
- The purchase of a new or assigned lease that’s less than 7 years, provided that the amount you pay is below the non-residential stamp duty threshold
- Property investment funds, such as co-ownership authorised contractual schemes (CoACS) and property authorised investment funds (PAIFs)
Speak with your legal adviser to check whether you’re eligible for any commercial stamp duty relief or exemptions. To claim relief, you must submit a stamp duty return within 14 days of purchasing the property or land. This applies even if no tax is due. You don’t need to submit a return if you’re eligible for a commercial stamp duty exemption.
Can you reduce the amount of commercial stamp duty payable?
The amount of commercial stamp duty payable is based on the purchase price of the property or land. If other items have been included in the transaction, such as furniture or machinery, this can reduce the taxable price. Some items may also be suitable for capital allowances. You may be able to reduce the stamp duty payable for a large transaction using a mitigation scheme. With all of these examples, it’s essential to speak with your legal adviser. This is to avoid the possibility of being challenged by HMRC if they dispute a reduction in the amount of commercial stamp duty you need to pay.