Thinking of buying a commercial property? Wondering if you’ll have to pay stamp duty on your purchase? In a word, yes. Stamp Duty is a one-off tax that applies to all commercial property transactions over £150,000, payable when either purchasing or renting land and properties in England and Northern Ireland.

The amount of stamp duty can significantly increase the purchase price of a property, so you should factor this amount into the overall purchase when calculating the affordability.

What about the stamp duty holiday?

While benefiting buyers of residential property over the past year, the stamp duty holiday doesn’t apply to commercial, or non-residential, properties such as offices, shops and work units. However, it does apply to holiday lets that are classed as residential property.

What counts as non-residential property?  

For UK tax purposes, the term non-residential property doesn’t simply mean ‘property that is not lived in’, but includes:

  • Shops and offices
  • Forests
  • Land that’s part of a working farm or used for other agricultural reasons
  • Any other land or property that isn’t part of a dwelling’s garden or grounds.
  • Property not suitable to be lived in (eg: a garage).
  • Six or more residential properties bought in a single transaction
  • Mixed-use commercial and residential properties – for example, a flat connected to a shop, doctors’ surgery or office

How much is Stamp Duty on commercial property purchases? 

The amount of Stamp Duty you’ll pay depends on a number of different factors, including purchase price and lease term for example. The amount payable is calculated based on the purchase price on a sliding scale.

  • 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%

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 – the length of the lease term, the annual rent, and any premium paid for the lease.

As a general rule, Stamp Duty when 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 a rate of 1%
  • The portion above £5,000,000 attracts a 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 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.

This amounts to a double taxation on the purchaser of the property – something else to bear in mind when investing in commercial property.

Here at Louis Taylor, we have extensive experience in investments from small single occupancy premises to much larger complex multi let locations. If you have a commercial investment portfolio or are thinking of starting to invest in commercial property do not hesitate to contact us directly and one of our team will be more than happy to offer advice and detail on the services we offer.

Contact our Commercial Team on or call 01782 260 222 for more information.