Buying a House > Conveyancing > SDLT > Commercial Property

SDLT on commercial properties is charged on the purchase price, the same as for residential properties. Commercial properties fall into two categories: non-residential properties and mixed-use properties.

Non-residential property is property that exists for commercial use only (e.g. shops and offices), agricultural land, forests and any other land or property which is not used as a residence. Additionally, 6 or more residential properties bought in a single transaction are also considered in this bracket. A mixed-use property, according to HMRC, is a property that shares elements of residential and non-residential property. For example, a flat that is connected to a restaurant or a shop could constitute a mixed property.

Non-Residential SDLT Rates

For higher-value purchases, Commercial Stamp Duty is substantially less than the SDLT paid on residential property purchases or transfers. Residential rates are hiked from 5% to 10% on property value over £925,000, and then again to 12% on anything over £1.5 million, whereas commercial rates remain flat, at 5%.

Purchase Price

SDLT rate paid on property value within each tax band

Up to £150,0000%
Between £150,001 and £250,0002%
Over £250,0005%

These figures apply principally to freehold commercial properties. If, however, you’re purchasing a leasehold, you won’t just have to pay SDLT on the purchase price but on the value of any annual rent payable. This is calculated using the rates below:

RentSDLT rate paid on rent within each tax band
Up to £150,0000%
Portion between £150,001 and £5,000,0001%
The portion over £5,000,0002%

Check out our recent post for more information on the differences between leaseholds and freeholds.

Stamp Duty on Mixed-Use Property

New owners of mixed-use property pay the same SDLT rates as acquirers of commercial property.

We already touched on the cost differential – at least for more expensive properties – between residential and commercial stamp duty rates. And these savings are a significant incentive to claim the property you’re buying is mixed-use. There are obvious cases where this is legitimate. But then there are other cases where it’s clear a loophole is being exploited for tax purposes. For instance, some buyers may seek to incorporate a nominally commercial plot, such as a paddock, into an otherwise residential property so as to claim mixed-use and save money. Buyers of larger properties have been know to try and pass them off as “fully functioning estates”.

For this reason, HMRC has become increasing vigilant in terms of how it assesses claims of mixed use, something it considers purchases on a case-by-case basis. There’s no “tick box” process – it’s up to the buyer to demonstrate that a property declared as mixed-use genuinely incorporates commercial elements. This could involve providing copies of agricultural or commercial agreements. In any case, if you are looking to purchase property on a mixed-use basis, it’s definitely recommended to seek the advice of a tax specialist first. After all, the difference you might need to stump up can be a substantial sum.