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Stamp Duty Land Tax (Commercial) – A Bolt from the Blue

In an unexpected move, as part of the 2016 Budget, the Chancellor announced changes to SDLT rates for commercial property transactions, which he described as “a big tax cut for small firms. All in a budget that backs small business.”

Rather than paying the same rate on the whole value of the property, the new rates only apply to the portion of the price that falls into a particular price bracket.

Previously, paying just £1 more on a property price could result in a tax bill thousands of pounds higher because the price paid  fell into a higher bracket.

Osborne said the new system would raise an extra £500m a year and only 9% of transactions would end up paying more tax  than before.

How it all adds up on paper

Old Rates – Freehold (based on freehold purchase price or leasehold premium) :

0% – Up to £150,000 – freehold or leasehold premium with annual rent under £1,000

1% – Up to £150,000 – leasehold premium with annual rent of £1,000 or more

1% – £150,001 to £250,000

3% – £250,001 to £500,000

4% – Over £500,000

New Rates – Freehold:

0% – Up to £150,000 – freehold or leasehold premium

2% – the portion from £150,001 to £250,000

5% – the portion above £250,000

For example, before, if you bought an industrial unit or retail premises in Gloucester worth £270,000, you would previously have paid over £8,000 in SDLT. Now you will pay just £3,000. 

Old Rates – Leasehold (based on the value of the rent over the lifetime of the lease – the Net Present Value (NPV):

0% – Up to £150,000

1% – the portion over £150,000

New Rates – Leasehold:

0% – Up to £150,000

1% – the portion from £150,001 to £5,000,000

2% – the portion above £5,000,000

The changes here do not result in a difference unless the level of rent and thus the NPV is very high.

WSP Solicitors

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to WSP Solicitors directly.

Published on 14th April 2016
(Last updated 10th July 2023)