The Chancellor has announced that with effect from 12.00am on 17 March 2016 the way in which Stamp Duty Land Tax (SDLT) is calculated on commercial properties will be overhauled in the same manner as was the case with residential transactions last year.
Prior to 17 March 2016 SDLT on commercial property was charged wholly at the rate applying 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. Somebody buying a commercial property at a price of £350,000 will therefore pay no SDLT for the first £150,000, 2% (i.e. £2,000) in respect of the value between £150,001 and £250,000 and 5% (i.e. £5,000) in respect of the value above £250,000. At a total charge of £7,000 the SDLT is less than the £10,500 that was payable based on the old SDLT calculation method.
Broadly speaking the changes mean that buyers of commercial property worth up to £1.05 million will pay less in stamp duty. Roughly 10% of transactions are above that value and buyers of those will pay more following the changes.
Stamp duty rates for leasehold rent transactions will also change, with a new 2% stamp duty rate on leases with a net present value over £5 million.