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Stamp Duty Land Tax on commercial and mixed use properties

January 18, 2016

By Simon Misiewicz

Are you buying mixed use properties or commercial properties?

Are you aware that different Stamp Duty Land Tax (SDLT) rates apply?

The problem — different SDLT rates for commercial properties 

As an investor you may be looking to buy additional properties as an investment. As discussed in my earlier article, you will need to pay SDLT and this will vary depending on the value of the residential property.

However, if you are buying commercial properties then you will pay SDLT at different rates, as follows:

– 0% on property valued between £0 – £150,000
– 1% on property valued between £150,000 – £250,000
– 3% on property valued between £250,000 – £500,000
– 4% on property valued over £500,000

You are therefore going to be paying more SDLT on commercial buildings than you would residential properties.

Whenever you buy residential properties you will pay the % figure provided in my article, with the amounts based on a sliding scale.

You might think that the same applies to commercial properties. The harsh reality is that this is not the case. On commercial properties you will pay the % on the full amount once you go over certain values as shown above.

The rules for commercial properties are also applied if you are buying mixed use properties, for example, flats above offices or shops.

Can you see that you will pay more SDLT on commercial properties than you would residential?

Do you understand that the SDLT calculations for commercial properties are very different to residential properties?

A real life client example — how SDLT impacts property investors buying mixed use or commercial properties

For the purposes of this article we are going to name my client John to protect his identity.

John buys a shop with a flat above and pays £160,000. He thought that there were two properties and that he could divide the value between the residential element and the shop. This, in his mind, would mean there would be no SDLT to pay, happy days.

Sadly, upon purchasing the property he gets a nasty surprise when his solicitor tells him about a SDLT charge on the £160,000 purchase price — of 1%, which is £1,600.

Let’s look at another example. Let’s say John buys a freehold commercial property for £275,000. In this case the SDLT he owes is calculated as follows:

– 3% of £275,000 = £8,250
– Total SDLT = £8,250

Next steps

If you want to understand this topic in more detail or to discuss other finance/tax questions then please book some time with us using the below calendar:

If you are looking for a new accountant then please book some time with us using the below calendar. Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.

 



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Telephone: 0115 939 4606
Email: simon@optimiseaccountants.co.uk