commercial Stamp duty calculator

What is commercial stamp duty?

Stamp Duty Land Tax (SDLT), often known as commercial stamp duty, is a tax imposed on the purchases of commercial (non-residential) properties, such as office buildings, retail spaces, or industrial units.

It is typically calculated as a percentage of the property's value and is paid by the buyer during the purchase process, with the specific rates and thresholds for stamp duty decided by HMRC.

SDLT applies to leases and freehold property sales and is a significant cost to consider in commercial real estate transactions.

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What is classed as non-residential property?

In the context of commercial stamp duty, non-residential property refers to real estate that is not used or intended to be used as a private dwelling or for residential purposes. This classification includes a wide range of property types used for business, industrial, or agricultural activities.

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Examples of non-residential property include:

• Commercial property, for example shops, offices, factories, hotels, etc.
• Property that isn’t suitable to be lived in
• Forests
• Agricultural land that’s part of a working farm or used for agricultural reasons
• Vacant land designated for commercial development or any other land or property that is not part of a dwelling’s garden or grounds
• 6 or more residential properties bought in a single transaction

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Additionally, properties that serve mixed uses, such as a building with both residential and commercial spaces, may have specific portions considered non-residential, subjecting them to commercial property stamp duty. Non-residential properties also cover public facilities, such as schools, hospitals, and government buildings, when they are involved in transactions.

Stamp duty rates and rules for non-residential or commercial properties differ from residential properties, often resulting in different tax structures based on the property’s use, size, and value. These classifications are essential in determining the applicable tax.

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What are the current SDLT rates?

Freehold sales and transfers

The current rates for freehold commercial stamp duty in England and Northern Ireland, as outlined by HMRC, can be found below. This table can also be used to calculate the SDLT rate for a lease premium.

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As seen above, the rate of stamp duty is dependent on the property price paid. Here’s how the Commercial Stamp Duty Land Tax (SDLT) calculation works using the three rate thresholds:

1. 0% rate on the first £150,000:
   • The first price threshold is £150,000, which means that for the portion of the property purchase price up to £150,000, no SDLT is charged.
2. 2% rate on the next £100,000 (from £150,001 to £250,000):
   • The next £100,000, which falls between £150,001 and £250,000, is taxed at a rate of 2%.
3. 5% rate on any amount above £250,000:
   • Any part of the purchase price over £250,000 is taxed at 5%.

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This tiered system ensures that different portions of the property price are taxed at progressively higher rates as the price exceeds each threshold. However, if a property's entire purchase price is less than £150,000, the commercial stamp duty payable is £0.

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Freehold commercial SDLT example

For example, if you buy a freehold commercial property for £275,000 in England or Northern Ireland, the stamp duty calculation is as follows:

• 0% on the first £150,000 = £0
• 2% on the next £100,000 = £2,000
• 5% on the final £25,000 = £1,250

In the above example, the commercial stamp duty payable will be £3,250.

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New leasehold sales and transfers

When purchasing a new non-residential or mixed-use leasehold property, you will need to pay SDLT on two components:

• The purchase price of the lease (known as the ‘lease premium’), calculated using the standard SDLT rates table above.
• The value of the annual rent (referred to as the ‘net present value’ or NPV), calculated using the rates in the table below.

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These two amounts are calculated separately and then combined to determine the total SDLT owed. However, if the NPV is less than £150,000, no SDLT is payable on the rent.

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How do I calculate stamp duty tax for commercial property in Scotland or Wales?

In Scotland and Wales, Stamp Duty Land Tax (SDLT) does not apply, instead alternative taxes are applied by the two countries.

• In Scotland, Land and Buildings Transaction Tax (LBTT) applies
• In Wales, Land Transaction Tax (LTT) applies

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To calculate either LBTT or LTT using our above Commercial Property Stamp Duty Calculator, please select either "Scotland" or "Wales" from the drop down menu when selecting your UK country.

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Alternatively, use our dedicated Land and Buildings Transaction Tax (LBTT) Calculator or Land Transaction Tax (LTT) Calculator for quick and easy tax calculations.