When a business buys non-residential or mixed-use property in England, Stamp Duty Land Tax (SDLT) is charged in bands: 0% on the first £150,000, 2% on the portion from £150,001 to £250,000 and 5% above £250,000. New leases can also attract SDLT on the rent. The return must be filed and the tax paid within 14 days of completion, usually by your solicitor or conveyancer.
Commercial property tax rules differ from the residential ones most people know from buying a home. This guide explains, using GOV.UK guidance, which rates apply to shops, offices, land and mixed-use buildings, how leases are treated, and what happens at completion.
Where does Stamp Duty Land Tax apply?
SDLT applies to land and property transactions in England and Northern Ireland. Scotland has its own Land and Buildings Transaction Tax, and Wales has used Land Transaction Tax since April 2018. If your property is in Scotland or Wales, different rates and rules apply and this guide does not cover them.
SDLT is usually charged on the "consideration", which is normally the purchase price. GOV.UK notes it can also include other things given in exchange for the property, such as goods, services or taking on a debt.
What counts as non-residential property?
GOV.UK lists the following as non-residential for SDLT purposes:
- Commercial property, such as shops or offices.
- Property that is not suitable to live in and could not practically be made suitable.
- Forests.
- Agricultural land that is part of a working farm or used for agricultural reasons.
- Any other land or property that is not part of a dwelling's garden or grounds.
- Six or more residential properties bought in a single transaction.
Note that agricultural land sold as part of a home's garden or grounds is charged at residential rates, not non-residential rates.
What is mixed-use property?
A mixed-use property has both residential and non-residential elements. Typical examples on GOV.UK include a flat connected to a shop, a doctor's surgery or an office. This is common on UK high streets, where a shop on the ground floor has a flat above it.
Mixed-use purchases are charged using the same non-residential and mixed-use rates set out below, rather than the residential rates. Because the residential rules can include extra charges, such as the higher rates for additional dwellings, the classification of a property can make a significant difference to the bill. If a property's status is unclear, take professional advice before completion.
What are the SDLT rates for non-residential and mixed-use property?
For freehold purchases, and for premiums paid on leases, SDLT is charged on the portion of the price that falls within each band:
| Portion of the price | SDLT rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| Above £250,000 | 5% |
The rates are not applied to the whole price. Each slice is taxed only at its own rate. GOV.UK gives this example for a freehold commercial property bought for £275,000:
- 0% on the first £150,000 = £0
- 2% on the next £100,000 = £2,000
- 5% on the final £25,000 = £1,250
- Total SDLT: £3,250
The threshold for non-residential property is £150,000, compared with £125,000 for standard residential purchases. Even when no tax is due, GOV.UK points out that most transactions under £150,000 still need an SDLT return.
How is SDLT calculated on a commercial lease?
Leases are common for business premises, and SDLT on a new lease is worked out in two parts, which are then added together:
- The lease premium, meaning any lump sum paid for the lease. This is taxed using the same bands as freehold purchases above.
- The net present value (NPV) of the rent, which is based on the total rent payable over the life of the lease.
The NPV of the rent is taxed using these bands:
| Net present value of rent | SDLT rate |
|---|---|
| £0 to £150,000 | 0% |
| £150,001 to £5,000,000 | 1% |
| Above £5,000,000 | 2% |
Calculating NPV involves discounting future rent, so it is best worked out using HMRC's SDLT calculator or by your conveyancer. If you buy an existing lease (known as an assignment), SDLT is only due on the price you pay for the lease, not on the rent.
When is SDLT paid, and who files the return?
You must send an SDLT return to HMRC and pay the tax within 14 days of completion. In most transactions, your solicitor, agent or conveyancer files the return and pays the tax on your behalf on the completion day, then adds the amount to their fees. If they do not, you can file and pay yourself.
Missing the deadline has consequences:
- Return up to 3 months late: a £100 penalty.
- Return more than 3 months late: a £200 penalty.
- Return not filed within 12 months: a tax-based penalty, which can be up to the full amount of tax due on the return, as well as the fixed penalty.
- Late payment: interest is charged from the day after the tax was due until it is paid.
What should a business check before buying?
- Confirm whether the property is residential, non-residential or mixed-use, and why.
- Ask your conveyancer for an SDLT estimate early, and include it in your budget alongside legal fees.
- For a new lease, ask for the SDLT on both the premium and the rent.
- Check whether any linked purchases from the same seller could affect the rate.
- Agree who will file the return and confirm it has been submitted after completion.
- Use HMRC's SDLT calculator as a cross-check.
Frequently asked questions
Is a shop with a flat above it residential or non-residential?
It is generally mixed-use, because it has both residential and non-residential parts. GOV.UK treats mixed-use property under the non-residential and mixed-use rates.
Does buying six homes at once count as non-residential?
GOV.UK lists six or more residential properties bought in a single transaction as non-residential. Multiple Dwellings Relief, which used to offer an alternative, was abolished for most transactions completing on or after 1 June 2024.
Do I pay SDLT if I take an assignment of an existing lease?
You pay SDLT only on the price paid for the lease. There is no SDLT on the rent for an assigned lease, according to GOV.UK.
Can buying several properties from the same seller change the rate?
Yes, it can. GOV.UK warns that multiple purchases or transfers between the same buyer and seller may attract a higher rate, so tell your conveyancer about any connected purchases.
Sources
- GOV.UK: SDLT non-residential and mixed-use rates
- GOV.UK: Stamp Duty Land Tax overview
- GOV.UK: Penalties and interest on a late SDLT return
- GOV.UK: Abolition of Multiple Dwellings Relief from 1 June 2024
General information only, not financial, tax or legal advice. SDLT rates and rules can change, and the treatment of any transaction depends on its facts, so check GOV.UK and speak to a solicitor or tax adviser before buying.