Changes to Stamp Duty on Commercial Property

The way stamp duty on freehold commercial property and leasehold premium transactions is calculated was changed in the recent budget. Stamp duty rates for residential property were changed to a graduated system in 2014 but on commercial property continued to apply to the whole transaction value.

From 17 March 2016 the rates will apply to the value of the property over each tax band. The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000. Buyers of commercial property worth up to £1.05 million will pay less in stamp duty.

When you rent or buy a commercial leasehold property you pay Stamp Duty on both the purchase price of the lease (the ‘lease premium’) at the freehold rates above and the net present value of the annual rent. These are calculated separately then added together. If you buy an existing (‘assigned’) lease, you pay Stamp Duty on the lease price (or ‘consideration’) only. The net present value is based on the total rent over the life of the lease. Stamp Duty on the rent if the net present value is less than £150,000 is 0%, between £150,001 and £5,000,000 the rate is 1% and above £5,000,000 the rate is now 2%.