SDLT on commercial property: rates, leases and mixed use

Commercial property buyers pay Stamp Duty Land Tax (SDLT) at lower top rates than residential buyers, but on larger sums and often on VAT as well. Leases bring their own calculation. This guide covers purchases, leases and the mixed-use rules that can save tax.

Purchase rates

These rates apply to:

• offices, shops, warehouses, factories and other commercial buildings
• agricultural land and woodland
• land and property that is not residential
• mixed-use property, which includes both residential and non-residential elements

Example

A company buys a warehouse for £1.2 million plus VAT of £240,000 (the seller has opted to tax).

The VAT adds £12,000 to the SDLT. If the purchase qualifies as a transfer of a going concern (for example, a let investment property bought with the tenants in place and the buyer also opting to tax), no VAT is charged and the SDLT is lower. See VAT on property.

Leases

When a new commercial lease is granted, SDLT is charged on:

1. the net present value (NPV) of the rent payable over the term, and
2. any premium paid, at the purchase rates above

The NPV discounts future rent at 3.5% a year. HMRC’s online SDLT calculator works it out. Where the lease has a premium and the annual rent is £1,000 or more, the 0% band on the premium is not available.

Assignments of existing leases are generally treated as purchases, with SDLT on the price paid. Rent reviews, extensions and holding over can create further SDLT returns.

Mixed-use property

If a purchase includes both residential and non-residential elements, the non-residential rates apply to the whole price. Examples include:

• a shop with a flat above
• a farmhouse sold with agricultural land
• a house with substantial grounds used for a separate business, such as a commercial equestrian facility

HMRC looks closely at mixed-use claims. Large gardens, paddocks or woodland that form part of a home’s grounds do not make a residential purchase mixed use, and several tribunal cases have rejected such claims.

Six or more dwellings

If a single transaction includes six or more dwellings, the buyer can choose to treat it as non-residential and pay the non-residential rates. This is often cheaper for portfolio purchases, particularly where the higher rates for additional dwellings would otherwise apply. Multiple dwellings relief, which used to reduce SDLT on bulk purchases, was abolished for transactions completing from 1 June 2024.

Reliefs for commercial transactions

• Group relief: transfers between companies in a 75% group are exempt, subject to anti-avoidance rules
• Reconstruction and acquisition relief on certain company reorganisations
• Charities relief for property used for charitable purposes
• Sale and leaseback relief on the leaseback element

See SDLT reliefs.

Filing and payment

The SDLT return and payment are due within 14 days of completion (the effective date), including on the grant of most leases. See SDLT returns and deadlines.

Frequently asked questions

What are the SDLT rates on commercial property?

0% up to £150,000, 2% from £150,001 to £250,000 and 5% above £250,000.

Is stamp duty charged on VAT?

Yes. Where VAT is charged on the purchase price, SDLT is calculated on the VAT-inclusive amount.

How is SDLT on a commercial lease worked out?

On the net present value of the rent over the term (1% between £150,000 and £5 million, 2% above), plus SDLT on any premium at the purchase rates.

Does a shop with a flat above pay residential or commercial stamp duty?

Commercial. Mixed-use purchases pay the non-residential rates on the whole price.