Commercial Real Estate Stamp Duty In The UK

Buying a shop, office, or warehouse in the UK? You’ll likely need to pay stamp duty, a tax on property purchases. It is levied by the government on the transfer of property ownership, including commercial properties such as offices, retail spaces, industrial buildings, and mixed use developments.

We’ll explain how it works for commercial real estate and how you can calculate it.

Table of Contents

What is stamp duty?

Stamp duty, also called Stamp Duty Land Tax (SDLT), is a one-time tax you pay the government when you buy a commercial property. The more you spend, the more stamp duty you owe.

Why do I have to pay it?

Just like other taxes, the primary purpose of stamp duty is to generate revenue for the government and help fund public services and infrastructure projects. Moreover, it also discourages people from buying and selling property too often, which helps keep the market stable and regulated.

Calculating Stamp Duty On Commercial Properties

Stamp Duty Rates

The rate of stamp duty on commercial properties in the UK varies depending on the price and the location of the property. As of the latest updates, the following stamp duty rates apply to commercial real estate transactions:

£150,000 or less: You don’t pay any stamp duty.

£150,001 to £250,000: You pay 2% of the price.

Over £250,000: You pay 5% of the price (plus 2% on the portion between £150,001 and £250,000).

In addition to the standard stamp duty rates, there may be additional considerations that affect the amount of stamp duty:

Multiple Property Ownership: If you already own multiple properties, you may be subject to higher stamp duty rates.
Leasehold Properties: Stamp duty may also apply to leasehold transactions, with different rates and thresholds depending on the terms of the lease.

Stamp Duty Calculator

To estimate the amount of stamp duty payable on a commercial property transaction, you can use online stamp duty calculators provided by the UK government or professional real estate advisors. These calculators take into account the purchase price, property type, and other relevant factors to provide an accurate value of stamp duty liability.

Are there ways to save? Exemptions And Relief Measures

Exemptions

Certain types of commercial property transactions may be exempt from stamp duty, including:

Transfers between connected companies
Property transfers resulting from corporate reorganizations
Certain types of leases, such as short term leases or leases with a low rent threshold

Relief Measures

In some cases, relief measures may be available to reduce the amount of stamp duty payable on commercial property transactions. For example:

First time buyer relief: A reduced rate of stamp duty may apply to first time buyers purchasing commercial properties below a certain threshold.
Charitable relief: Charitable organizations may be eligible for relief from stamp duty on certain property transactions, provided the property is used for charitable purposes.

What about recent changes or updates?

COVID 19 Relief Measures

In response to the economic impact of the COVID 19 pandemic, the UK government introduced temporary relief measures to support businesses and stimulate economic activity.

These measures included a temporary reduction in stamp duty rates for commercial properties, aimed at incentivizing investment and facilitating property transactions during the challenging economic climate.

The Takeaway

Stamp duty is an important cost to factor in when buying commercial property. Understanding the rates, exemptions, and recent changes can help you make informed decisions and avoid surprises.

Remember, keep yourself updated and seek professional advice whenever buying or selling property.