Non-residential Stamp Duty
If you are purchasing a commercial property in England, Scotland or Wales, you may be eligible to pay Stamp Duty on your purchase. This includes freehold purchases, granting of new leases or the assignment of an existing leasehold property.
How much Stamp Duty will I pay on non-residential property transactions?
SDLT rates are based on price thresholds. A percentage is payable only on the portion of a property price which falls within each band.
England - Stamp Duty Land Tax
Freehold property, leasehold assignment or transfer value
| Property value, lease premium or transfer value |
SDLT Rate |
| £0 to £150,000 |
0% |
| £150,001 to £250,000 |
2% |
| £250,001+ |
5% |
Example:
If you bought a freehold pub for £500,000 you would pay nothing on the first £150,000, 2% on £150,001 to £250,000 and a further 5% on the amount above £250,001.
£0 - £150,000 = £150,000 x 0.00 = £0
£250,000 - £150,000 = £100,000 x 0.02 = £2,000
£500,000 - £250,000 = £250,000 x 0.05 = £12,500
Total = £14,500
New leasehold sales and transfers
When you purchase a new non-residential or mixed-use leasehold you pay SDLT on both the:
Purchase price of the lease (the ‘lease premium’) using the rates above
Value of the annual rent you pay (the ‘net present value’)
These are calculated separately and then added together.
The net present value (NPV) is based on the total rent over the life of the lease. You do not pay SDLT on the rent if the NPV is less than £150,000.
| Net present value of rent |
SDLT Rate |
| £0 to £150,000 |
0% |
| The portion from £150,001 to £5,000,000 |
1% |
| The portion over £5,000,001 |
2% |
Wales - Land Transaction Tax
Freehold property, leasehold assignment or transfer value
| Property value, lease premium or transfer value |
LLT Rate |
| £0 to £225,000 |
0% |
| £225,001 to £250,000 |
1% |
| £250,001 to £1,000,000 |
5% |
| £1,000,001+ |
6% |
New leasehold sales and transfers
If you pay rent on the grant of a lease, the 0% tax band may not apply to the lease premium (see table above), this is called the ‘relevant rent’ rule. For any transaction completed on or after 4 February 2021, the relevant rent threshold is £13,500.
The rent over the term of a newly granted lease may be liable to LLT. The tax due is calculated on its net present value (NPV).
| Net present value of rent |
LLT Rate |
| £0 to £225,000 |
0% |
| The portion from £225,001 to £2,000,000 |
1% |
| The portion over £2,000,001 |
2% |
Scotland - Land and Buildings Transaction Tax
Freehold property, leasehold assignment or transfer value
| Property value, lease premium or transfer value |
LBLT Rate |
| £0 to £150,000 |
0% |
| £150,001 to £250,000 |
1% |
| £250,001+ |
5% |
New leasehold sales and transfers
Commercial leases will pay LBTT at the same rate as for SDLT on rent - but tenants will be required to submit LBTT returns every 3 years, if there is an assignation of the lease and at lease end - with LBTT being adjusted if applicable. There will be no cut off on assessment at the end of year 5, as there is with SDLT. LBTT on any capital payment will be at the same rates as for a purchase.
Any rent deposit by a tenant on a new lease, or by an assignee taking an assignation of an existing lease, will be treated as part of the consideration for the lease or assignation (as applicable) for LBTT purposes, IF it exceeds twice the rent. This is particularly odd in the context of an assignation, where the deposit would be paid to the landlord, not to the assignor.