When buying non-residential or mixed-use property in England or Northern Ireland, you might need to pay Stamp Duty Land Tax (SDLT). The tax applies if the property price exceeds a certain threshold. This guide will walk you through the rules, rates, and calculations for SDLT on non-residential and mixed-use properties.
What Are Non-Residential and Mixed-Use Properties?
Non-Residential Properties Include:
- Commercial properties like shops, offices, and warehouses.
- Unsuitable residential properties (e.g., properties with structural risks or radioactive contamination).
- Forests (non-residential in nature).
- Agricultural land used for farming purposes.
- Any land not considered part of a dwelling’s garden or grounds.
- Six or more residential properties purchased in a single transaction.
Mixed-Use Properties:
Properties that combine residential and non-residential elements. Examples include:
- A flat above a shop.
- A doctor’s surgery attached to a house.
- A building with office space and residential units.
Key Rule: If agricultural land is sold with a house (like fields behind a cottage), it is taxed at residential SDLT rates.
Use the SDLT calculator to estimate your tax liability.
SDLT Rates for Non-Residential Freehold Sales and Transfers
When you buy a freehold commercial property or pay a lease premium for a non-residential property, these rates apply:
| Property Price Range | SDLT Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| Above £250,000 | 5% |
Calculation Example:
Buying a commercial property for £275,000:
- 0% on the first £150,000 = £0
- 2% on the next £100,000 = £2,000
- 5% on the remaining £25,000 = £1,250
Total SDLT: £3,250
SDLT on New Leasehold Sales and Transfers
When you buy a new non-residential or mixed-use leasehold property, SDLT is calculated based on:
- The lease premium (purchase price) – uses the freehold rates above.
- The net present value (NPV) of the total rent payable over the lease term.
If you buy an existing (assigned) lease, you only pay SDLT on the lease premium.
SDLT Rates Based on Net Present Value (NPV) of Rent
| NPV of Rent | SDLT Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £5,000,000 | 1% |
| Above £5,000,000 | 2% |
NPV Explained:
The NPV calculates the total rent you’ll pay over the lease period, adjusted for inflation.
Calculation Example:
Buying a non-residential leasehold property with:
- Lease premium: £300,000
- NPV of rent: £600,000
Step 1: SDLT on the Lease Premium
- 0% on the first £150,000 = £0
- 2% on the next £100,000 = £2,000
- 5% on the remaining £50,000 = £2,500
Total on lease premium: £4,500
Step 2: SDLT on NPV of Rent
- 0% on the first £150,000 = £0
- 1% on the remaining £450,000 (since £600,000 – £150,000 = £450,000) = £4,500
Total on NPV of rent: £4,500
Total SDLT Payable:
- £4,500 (lease premium) + £4,500 (NPV of rent) = £9,000
Important SDLT Rules for Non-Residential Properties
- Threshold: SDLT applies if the property price is £150,000 or more.
- SDLT Return: You must submit a return for most transactions even if no SDLT is due.
- Mixed-Use Properties: Always use non-residential rates regardless of the residential portion’s value.
SDLT on non-residential and mixed-use properties might seem complicated, but understanding the thresholds and rates helps you avoid surprises. Use HMRC’s SDLT calculator to plan ahead, especially if you’re dealing with leaseholds or mixed-use properties.
FAQ’s
What is SDLT for non-residential properties?
SDLT applies to commercial, agricultural, or mixed-use properties when the price exceeds £150,000.
How is SDLT calculated on commercial properties?
SDLT is calculated in portions: 0% on the first £150,000, 2% on the next £100,000, and 5% on any amount above £250,000.
What is a mixed-use property for SDLT purposes?
Mixed-use properties have both residential and non-residential parts, like a shop with a flat above.
Do I pay SDLT on leasehold rent?
Yes, SDLT applies if the net present value (NPV) of the rent exceeds £150,000, at 1% for amounts up to £5 million and 2% above £5 million.
Is SDLT required if the property costs less than £150,000?
In most cases, you must still submit an SDLT return even if no tax is due for properties below £150,000.