Commercial Property SDLT
Lower rates for business and non-residential property.
In this article
What is Commercial Property?
Commercial or non-residential property includes:
- Shops, offices, and retail premises
- Warehouses and industrial units
- Agricultural land and buildings
- Forests and woodland
- Any property that isn't used as a dwelling
Commercial SDLT Rates
Non-residential property benefits from lower rates and no additional property surcharge:
| Band | Commercial Rate | Residential (for comparison) |
|---|---|---|
| £0 - £150,000 | 0% | 0% (to £125k) |
| £150,001 - £250,000 | 2% | 2% |
| Over £250,000 | 5% | 5-12% |
Key Advantages of Commercial Rates
- • Lower top rate: 5% vs 12% for residential
- • No 5% surcharge: Even for companies or additional purchases
- • Higher nil-rate: £150,000 vs £125,000 for residential
- • No non-resident surcharge: The 2% extra doesn't apply
Example Calculations
| Price | Commercial SDLT | If Residential | Saving |
|---|---|---|---|
| £200,000 | £1,000 | £1,500 | £500 |
| £500,000 | £14,500 | £15,000 | £500 |
| £1,000,000 | £39,500 | £43,750 | £4,250 |
| £2,000,000 | £89,500 | £163,750 | £74,250 |
VAT Considerations
Commercial property can be subject to VAT, which affects the SDLT calculation:
- If the seller has "opted to tax", VAT at 20% is added to the price
- SDLT is calculated on the VAT-inclusive price
- VAT-registered buyers can usually reclaim the VAT
- But cannot reclaim the additional SDLT caused by the VAT
Lease Premiums and Rents
Commercial leases have their own SDLT rules:
Premium (upfront payment)
Taxed at the standard commercial rates shown above.
Rent (Net Present Value)
SDLT on rent is calculated on the "Net Present Value" of rent over the lease term:
- 0% on NPV up to £150,000
- 1% on NPV between £150,001 and £5,000,000
- 2% on NPV over £5,000,000
Six or More Dwellings Rule
If you buy six or more residential properties in a single transaction, you can choose to have them treated as non-residential, benefiting from the lower commercial rates. This is common for portfolio acquisitions.
Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.
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