If you're negotiating a commercial lease or purchasing a property, it’s crucial to know whether Stamp Duty applies to your transaction and how much you might need to pay.
What is Stamp Duty on commercial property?
Stamp Duty Land Tax (SDLT) is a tax payable on land or property transactions in England and Northern Ireland and applies when land is purchased or when a lease is granted.
What is Stamp Duty Land Tax charged on?
In England and Northern Ireland, SDLT applies to land transactions, according to:
- The price they were paid for.
- Any premiums that were paid.
- The rent that is payable.
- In certain circumstances, the market value.
Land transactions are the acquisition of chargeable interests, like:
- Freeholds and leaseholds.
- Interests.
- Rights.
- Powers over land.
Get in touch with our Commercial Property Solicitors today for further support and guidance on figuring out how much Stamp Duty Land Tax you will need to pay.
How much is Stamp Duty Land Tax?
When calculating commercial Stamp Duty, the following rates apply to freehold sales and transfers:
- 0% up to £150,000.
- 2% on the next £100,000 between £150,001 and £250,000.
- 5% on the remaining amount above £250,000.
Example calculation:
If you were to purchase a freehold commercial property for £300,000, the SDLT owed will be calculated as follows:
- 0% on the first £150,000 = £0.
- 2% on the next £100,000 = £2,000.
- 5% on the final £50,000 = £2,500.
The total SDLT owed would be £4,500.
Commercial property leasehold sales and transfers
For new commercial property leasehold sales and transfers, you will pay SDLT on the purchase price of the lease (also known as the lease premium) using the same rates as freehold sales and transfers, as well as the value of the annual rent you pay (also referred to as the ‘net present value’). These will be calculated separately and then added together.
Net present value of rent rates:
- 0% up to £150,000.
- 1% on the portion from £150,001 TO £5,000,000.
- 2% on the portion above £5,000,000.
Example calculation:
If you were to purchase a new commercial property for freehold worth £300,000, the money owed would be calculated as follows:
SDLT:
- 0% on the first £150,000 = £0.
- 2% on the next £100,000 = £2,000.
- 5% on the final £50,000 = £2,500.
The total SDLT owed would be £4,500.
Net present value of rent:
- 0% on the first £150,000 = £0.
- 1% on the portion between £150,001 and £5,000,000 = £3,000.
- 2% on the portion above £5,000,000 = £0.
The total net present value would be £3,000.
£4,500 + £3,000 = £7,500 owed.
You can also use HMRC’s SDLT calculator to work out how much you will need to pay. However, this provides indicative figures only, so professional advice should always be sought to ensure calculations are correct.
It’s also important to note the following when calculating commercial property stamp duty:
- If VAT is payable on the premium or rent, it must be included when calculating SDLT liability.
- If you're taking an assignment of a lease, SDLT is only payable on the amount you have paid for the assignment.
For further support and guidance with calculating SDLT on your commercial properties, get in touch with our Commercial Property Solicitors today.
