Ilyas Patel Accountants in Preston
Ilyas Patel Accountants in Preston
Commercial or ‘non-residential’ property has specific tax rules, as well as exemptions and reliefs which you can apply for. Find out everything you need to know:
Rules and regulations
If you’re considering purchasing non-residential property, understanding the stamp duty regulations that apply is crucial. Stamp Duty Land Tax (SDLT) is payable on non-residential assets valued above £150,000. This applies to all types of commercial property, including shops, offices, and warehouses. The current system of SDLT rates is based on price thresholds, meaning you’ll only pay a percentage on the portion of the property price that falls within each band. In this post, we’ll delve into stamp duty on commercial property, providing practical advice to help you navigate the process.
SDLT is only payable on non-residential properties exceeding £150,000 in value, including shops, offices, and warehouses. The SDLT rates are based on price thresholds, and you’ll only pay a percentage on the portion of the property price that falls within each band. For example, if you purchase freehold retail space for £320,000, you’ll pay nothing on the first £150,000, 2% on £150,001 to £250,000, and 5% on the remaining amount above £250,001, totalling £5,500 in SDLT. When you buy a new non-residential or mixed-use leasehold, you’ll pay SDLT on both the purchase price of the lease and the net present value (NPV) of the annual rent you pay. The NPV is based on the total rent over the life of the lease, and you’ll only pay SDLT on the rent if the NPV exceeds £150,000. The percentage of stamp duty payable on the NPV ranges from 0% to 2%, depending on the amount.
If you’re considering purchasing non-residential property, it’s important to understand the stamp duty regulations that apply, including any exemptions or reliefs you may be eligible for.
As a first-time buyer, you may be entitled to specific SDLT reliefs. Developers or charities may also be able to claim relief when providing community amenities or buying property for charitable purposes.
Exemptions are available in certain circumstances, such as when property is transferred to you because of divorce or dissolution of a civil partnership, no money changes hands for a land or property transfer, or you buy a freehold property for less than £40,000.
If you buy a new or assigned lease of less than 7 years and the amount you pay is less than the SDLT threshold, you won’t have to pay SDLT.
You may also be exempt if you use alternative property financial arrangements, such as to comply with Sharia law.
Further guidance on SDLT reliefs can be found on the HMRC website, but remember that even if no tax is due, you must complete an SDLT return to claim relief.
Property investors and landlords can take advantage of the stamp duty cut that was announced in September 2022’s mini-budget. The threshold for property buyers was raised from £125,000 to £250,000, allowing them to pay a flat rate of 2% on all purchases up to £250,000. This means that landlords could save money as they previously had to pay a stamp duty rate of 3% on properties up to £125,000 and 5% on properties between £125,001 and £250,000. However, this cut is temporary and is set to expire in March 2025, which means landlords buying cheaper properties won’t benefit from a discount. You can use the government’s stamp duty calculator to determine how much tax you’d have to pay when buying a rental property.
Navigating stamp duty when purchasing commercial property can be complex, but having a basic understanding of the process can help you make informed decisions and potentially reduce the amount of tax you owe.
The amount of stamp duty payable on a commercial property is based on the purchase price of the property and any land included in the sale. However, any additional items included in the transaction such as machinery, tools, and fixtures can reduce the amount on which stamp duty is payable.
If the inclusion of these additional items causes the commercial property price to fall within a lower tax band, any stamp duty payable will be charged at the lower percentage rate. Therefore, it’s important to consider the value and nature of any items included in the transaction to potentially reduce your stamp duty liability.
Understanding the rules and regulations surrounding stamp duty for commercial property transactions can help you navigate the process more confidently and potentially save money on taxes.
To get an estimate of how much stamp duty you’ll need to pay for commercial property transactions, you can use the stamp duty calculator provided by HMRC. This tool can help you better understand your tax liability and plan accordingly.
If you’re considering buying commercial property in England, Northern Ireland, or Wales above a certain price, you’ll need to pay stamp duty within 30 days from the date of completion. To determine how much stamp duty is due, you can use HMRC’s calculator.
It’s important to note that regardless of who you are or where you’re from, stamp duty is required for everyone purchasing a residential or non-residential property in England, Northern Ireland, and Wales, including overseas buyers, corporate bodies, and non-natural persons. Failure to pay stamp duty within the required 30 days could result in a fine, but your solicitor or legal adviser can help you ensure that you meet this deadline.
If you’re considering buying or leasing commercial property, it’s important to understand the rules and regulations surrounding SDLT to ensure compliance. Here are some key points to keep in mind:
By following these tips, you can ensure compliance with SDLT regulations and avoid any penalties or interest charges. If you need assistance in determining your eligibility for a stamp duty refund, follow the steps below.
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