Commercial property Stamp Duty, LBTT and LTT calculator

Stamp Duty Land Tax in England and Northern Ireland

Amongst other property types Stamp Duty Land Tax (SDLT), often referred to simply as “stamp duty”, applies to non-residential property purchases in England and Northern Ireland. You pay stamp duty where the cost of the property is £150,000 or more.

If you are paying less than £150,000 you don’t pay SDLT, but must still send an SDLT return to His Majesty’s Revenues and Customs (HMRC).

The UK government gives the following examples of non-residential property:

• Commercial property, for example shops or offices
• Property that isn’t suitable to be lived in
• Forests
• Agricultural land that’s part of a working farm or used for agricultural reasons
• Any other land or property that is not part of a dwelling’s garden or grounds
• Six or more residential properties bought in a single transaction

Additional residential property purchases (second homes, rental homes, holiday homes and property used by friends or family that you don’t charge rent for) are subject to a “Stamp Duty Surcharge”. This is typically not applicable when buying commercial property.

Freehold versus leasehold

When you buy a commercial property on a freehold basis, you take permanent ownership of it. When you buy a commercial property on a leasehold basis, whilst the lease may be for, say, 100 years or more, ownership is temporary.

SDLT rates and bands on commercial property

The following SDLT rates apply on commercial property freehold sales and transfers in England and Northern Ireland. If you are paying a lease premium these rates and bands also apply:

Example

You are paying £550,000 for a commercial property.
You pay nothing on the first £150,000
You pay 2% SDLT on the amount £150,001 - £250,000 (i.e. £100,000, so the SDLT on that amount is £2,000)
You pay 5% on the amount over £250,000 (i.e. £300,000 so the SDLT on that amount is £15,000)
Your total SDLT tax bill will be £17,000.

New leasehold sales and transfers

SDLT is paid when a new commercial or mixed use property leasehold is sold or transferred, as follows:

1. SDLT is paid on the value of the annual rent you pay (“net present value” – NPV)
2. SDLT is paid on the purchase price of the lease (“lease premium”)

They are calculated individually and added together. Refer to the gov.uk website here for more details, including information on assigned leases. You can also read government guidance on buying leasehold properties here.

Land and Buildings Transaction Tax in Scotland

Historically Stamp Duty Land Tax applied to the whole of the UK, however from 1st April 2015, Scotland was the first country to put in place its own structure for property transaction tax.

Amongst other property types, LBTT applies to non-residential property purchases in Scotland, where the value of the property is £150,000 or more. If you are paying less than £150,000 you don’t pay LBTT.

• Revenue Scotland give the following examples of non-residential property:
• Commercial property, for example shops or offices
• Property that isn’t suitable to be lived in
• Forests
• Agricultural land that’s part of a working farm or used for agricultural reasons
• Six or more residential properties bought in a single transaction

Additional residential property purchases (second homes, rental property, holiday homes, property used by friends and family where rent isn’t charged) in Scotland are subject to the country’s “Additional Dwelling Supplement”. This is typically not applicable to commercial property purchases.

LBTT rates and bands on commercial property

The following LBTT rates apply on commercial property transactions on or after 25th January 2019 in Scotland:

Example

You are paying £400,000 for a commercial property.
You pay nothing on the first £150,000
You pay 1% LBTT on the amount £150,001 - £250,000 (i.e. £100,000, so the LBTT on that amount is £1,000)
You pay 5% on the amount over £250,000 (i.e. £150,000 so the LBTT on that amount is £7,500)
Your total LBTT tax bill will be £8,500.

Commercial leaseholds

When you enter into a commercial lease, LBTT is paid on the rent, if the rent is over the £150,000 threshold. LBTT may also be paid on other ‘chargeable considerations’ such as a lease premium. For more information visit this page on the Revenue Scotland website.

Land Transaction Tax in Wales

Wales followed Scotland in setting up its own Land Transaction Tax, effective from 1st April 2018.

Amongst other property types, Land Transaction Tax applies to non-residential property purchases in Wales, where the value of the property or land is £225,000 or more. If you are paying less than £225,000 you don’t pay LTT.

The Welsh government gives the following examples of non-residential property:

• Shops
• Offices
• Agricultural land (working farmland)
• Bare land

It also gives the following examples for mixed use property:

• a building which contains a shop and a flat
• a house with a doctor’s surgery
• a working farm with land that’s been farmed for commercial gain

LTT rates and bands on commercial property

The following LTT rates apply on freehold or leasehold commercial property transactions on or after 22nd December 2020 in Wales:

Example

You are paying £1,950,000 for a commercial property.
You pay nothing on the first £225,000
You pay 1% LBTT on the amount £225,001 - £250,000 (i.e. £25,000, so the LBTT on that amount is £250)
You pay 5% on the amount £250,000 - £1,000,000 (i.e. £750,000 so the LBTT on that amount is £37,500)
You pay 6% on the amount over £1,000,000 (i.e. £950,000 so the LBTT on that amount is £57,000)
Your total LBTT tax bill will be £94,750.

Tax on commercial property rent

When you enter into a commercial lease on a property in Wales, which you pay rent on, something called the “relevant rent” rule affects the tax band for a lease premium. Since 4th February 2021 the threshold for relevant rent is £13,500.

Visit the Welsh government website for information on commercial LTT.