Stamp Duty Land Tax (SDLT) for Commercial Property Transactions

17 Mar 2016

From 17 March 2016, the way in which stamp duty land tax (SDLT) rates for freehold commercial property and leasehold premium transactions are calculated has changed.

What are the changes?

The measure changes the rules for calculating the SDLT charged on purchases of non-residential properties and transactions involving a mixture of residential and non-residential properties.

Previously, for purchases of freehold SDLT was charged at a single percentage of the price paid for the property, depending on the rate band within which the purchase price falls. The table below shows the previous rates.

So, for instance, the purchase of a retail outlet for £300,000 would attract an SDLT payment of £300,000 x 3% = £9,000.
SDLT rates have been reformed to a slice system, so that SDLT is now payable on the portion of the transaction value which falls within each tax band. Also the band rates have been modified as shown in the table below:

Under the new regime the SDLT payable on a £300,000 retail outlet will be £7,500 (150,000 x 0% + 150,000 x 2% + 50,000 x 5%).

Why are the Changes Being Made?

The measure is meant to provide a boost for small businesses considering property purchases. Buyers of commercial property worth up to £1.05m will pay the same or less in stamp duty.

Whilst it is expected that around 90% of buyers will pay the same or less SDLT under the new regime, the 10% paying more will be making up the £500m per year increase in revenue expected from the reforms.

Other Changes

Stamp duty rates for leasehold rent transactions have also changed, with a new 2% stamp duty rate on leases with a net present value over £5m. These transactions were already taxed on a slice basis. All leasehold rent transactions up to £5m will remain unaffected.