In a nutshell: Commercial stamp duty (SDLT) is a tax you pay when buying non-residential property in England or Northern Ireland. Rates start at 0% for purchases under £150,000 but can increase to 2% or more for higher-value properties – and corporate buyers face even higher charges.
Buying a commercial property is one of the biggest investments your business will make. And like any major purchase, it comes with taxes – including stamp duty. But commercial stamp duty works differently from the residential version, with its own rates, rules and reliefs.
If you’re new to commercial property, you’ll probably have plenty of questions about stamp duty. You might wonder how much you’ll need to pay, when it’s due, or if there are ways to reduce the bill. Even if you’ve bought property before, recent changes and exemptions could affect your next purchase.
In this article we’ll break down everything you need to know about commercial stamp duty. You’ll find clear explanations of the rates, real-world examples and practical tips.
What is commercial stamp duty?
Commercial stamp duty is a tax on purchases of non-residential property, like offices, shops, warehouses, or agricultural land. It’s officially called Stamp Duty Land Tax (SDLT) and it applies whether you’re buying a freehold, taking on a new lease, or transferring a leasehold.
The main difference from residential stamp duty is how it’s calculated. For commercial properties, you pay tax on the entire amount above each threshold, not just the slice within each band. But while the calculation method differs, the rates themselves are generally lower than for residential properties. So the costs can still add up quickly for higher-value purchases, but you’ll often pay less in stamp duty than you would for a residential property of the same value.
You’ll also need to file and pay your stamp duty within 14 days of completing the purchase. If you miss this deadline, you could face penalties and interest. Unlike residential property, there’s no special relief for first-time buyers – although there are other exemptions that could cut your costs.
For example, buying a £1 million commercial property would trigger a stamp duty bill of £39,500 (£0 on the first £150,000 + 2% on the next £100,000 + 5% on the remaining £750,000). That’s a big upfront cost, so it’s important to factor it into your budget alongside your deposit, legal fees and surveys.
If you’re just starting to explore commercial property, our guide to purchasing commercial property walks you through the full process, from financing to completion.
Who needs to pay stamp duty on commercial property?
You’ll need to pay stamp duty on commercial property if:
You’re buying a non-residential property in England or Northern Ireland for over £150,000. This applies to freehold sales, new leaseholds and lease assignments
The property is used for commercial purposes. This includes offices, retail units, warehouses, factories, agricultural land (unless it’s part of a dwelling’s garden or grounds) and mixed-use properties like a shop with a flat above. Buy-to-let homes don’t count as commercial property
You’re buying through a company or special purpose vehicle (SPV) and the property is over £500,000. In this case, you’ll face a flat 17% rate unless you qualify for an exemption like group relief
Note: The rules are different in Scotland and Wales, where Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT) apply, respectively.
How much is stamp duty on commercial property?
Freehold commercial properties
The rates for freehold commercial properties are tiered, but unlike residential stamp duty, you pay the percentage on the entire amount above each threshold.
So if you buy a property for £500,000, you’d calculate your stamp duty like this:
£0 on the first £150,000
£2,000 on the next £100,000 (2%)
£12,500 on the remaining £250,000 (5%)
Total stamp duty = £14,500
That’s a significant amount, so make sure you include it in your cash flow forecasts alongside other upfront costs like legal fees and surveys. You can use the HMRC SDLT calculator to double-check your figures.
Leasehold commercial properties
For leasehold commercial properties, stamp duty is worked out separately for the lease premium (the upfront cost) and the net present value (NPV) of the rent.
You pay SDLT on the premium if it’s more than £150,000, using the same rates as freehold purchases (0% up to £150,000, 2% up to £250,000, and 5% above that). You only pay SDLT on the rent if the NPV exceeds £150,000, again using the commercial rates.
For example, if you pay a £200,000 premium and the NPV of the rent is £50,000, you’d calculate SDLT like this:
Premium: £200,000 = £0 (first £150,000) + £1,000 (2% on the next £50,000)
Rent (NPV): £50,000 = £0 (under the £150,000 threshold)
Total SDLT = £1,000
Short leases (less than seven years) or low-rent leases may be exempt, but it’s worth checking with your solicitor. You can use HMRC’s NPV calculations to work out the figures accurately.
Mixed-use properties
Mixed-use properties, like a shop with a flat above it, usually qualify for commercial stamp duty rates, which are often lower than residential rates. That can make them a cost-effective option for small businesses.
Even if part of the property’s residential, the whole purchase is taxed at commercial rates. So if you’re buying a £300,000 mixed-use property, you’d pay:
0% on the first £150,000 = £0
2% on the portion from £150,001 to £250,000 = £2,000
5% on the portion above £250,000 = £2,500
Total stamp duty = £4,500
This is usually cheaper than paying residential rates, which start at 2% on amounts over £125,000 and rise to 5% over £250,000. It’s one of the few ways to reduce your stamp duty bill as a first-time commercial buyer.
Are there stamp duty reliefs or exemptions for commercial property?
When you buy commercial property, you’ll usually have to pay stamp duty. But there are ways to manage the cost. There are several reliefs that could cut your stamp duty bill, or even eliminate it entirely.
Structuring the purchase in certain ways could help you avoid the 17% flat rate on purchases over £500,000. For example, buying through a group company or using a special purpose vehicle (SPV) might qualify you for relief. But the rules are complex, so it may be worth getting professional advice.
For many businesses, there’s no way around SDLT. But there are other ways to reduce your outgoings. Our 8 tax breaks for small businesses explains more ways to reduce your property costs, including capital allowances and business rates relief.
How and when do you pay stamp duty on commercial property?
You’ll need to file your stamp duty return and pay the tax within 14 days of completing a commercial property purchase. Your solicitor or conveyancer will likely handle this for you, but it’s your responsibility to make sure it’s done on time.
You can pay online via the HMRC website, or your solicitor can do it for you. Don’t miss the deadline – if you do, you’ll face penalties and interest.
Remember, stamp duty is just one of many upfront costs when buying commercial property. You’ll also need to budget for:
Deposits (typically 20-30% of the purchase price)
Legal fees (£1,500-5,000)
Surveys (£500-3,000)
Business rates and insurance
For more complex purchases, like buying property portfolios or properties over £500,000, it’s a good idea to speak with a tax advisor or solicitor. They can help you claim reliefs and structure the deal tax-efficiently.
If you’re financing the purchase, Tide’s commercial mortgages could help spread the cost. You can borrow from £50,000 to £50 million, with competitive rates and flexible terms.
What are common stamp duty mistakes to avoid?
Even experienced buyers can trip up on stamp duty. Here are the most common mistakes and how to avoid them:
Misclassifying the property type: For example, treating a mixed-use property as fully residential could result in paying too much tax
Missing the 14-day filing deadline: Set a reminder or ask your solicitor to confirm when the return has been submitted
Overlooking reliefs: Many businesses miss out on exemptions like group relief or charity relief simply because they don’t know they exist
Incorrect NPV calculations for leaseholds: This is a complex area, so use HMRC’s calculator or get professional help
Assuming residential rules apply: Commercial stamp duty works differently, so don’t rely on your experience with buy-to-let or home purchases
It’s important to stay on top of the rules. For example, March 2025 saw a surge in residential property transactions as buyers rushed to beat new stamp duty deadlines, showing just how important it is.
Wrapping up
Buying commercial property is a big step for any business. But with the right planning, it can also be a smart long-term investment. Whether you’re securing a permanent base, expanding your operations, or diversifying your assets, understanding stamp duty will help you budget confidently and avoid surprises.
Here’s a quick recap of what to keep in mind:
Check the rates: Commercial stamp duty starts at 0% for properties under £150,000, but rises to 2% or more for higher-value purchases. Corporate buyers face higher charges
Explore reliefs: Group relief, charity exemptions and mixed-use rates could significantly reduce your bill. So always check if you qualify
Plan for the cost: Factor stamp duty into your budget alongside deposits, legal fees and surveys so you’re not caught off guard
File on time: You’ve got 14 days to pay after completion, so work with your solicitor to meet the deadline and avoid penalties
Get expert advice: If you’re buying a high-value property or structuring the purchase through a company, a tax advisor can help you navigate the rules and claim reliefs
Think ahead: Consider how the property fits into your long-term plans – will it still meet your needs in five years’ time?
You don’t have to figure it out alone. Tide’s property finance options can help you fund your purchase, with loans from £50,000 to £50 million and support every step of the way.
FAQs
Do I pay stamp duty on a commercial property under £150,000?
No, the 0% band covers all commercial purchases up to £150,000. But if you’re buying through a company, different rules may apply.
How is SDLT different for mixed-use properties?
Mixed-use properties are taxed at commercial rates, which are usually lower than residential rates. The commercial portion of the property drives the calculation.
Can I claim relief if I’m buying through a limited company?
Yes, reliefs like group relief may apply. But if the property costs over £500,000, you’ll need to pay a flat 17% rate (unless you qualify for an exemption).
What happens if I miss the filing deadline?
You’ll have to pay penalties and interest, which can add hundreds or even thousands to your bill. Your solicitor should file the return for you, but it’s your responsibility to check it’s been done.
How do recent legislative changes affect my business?
The biggest change is the 17% flat rate for corporate buyers purchasing properties over £500,000. Relief thresholds have also been adjusted, so check the latest rules before you buy.
When should I consult a professional?
If you’re buying a high-value property, claiming relief, or structuring the purchase through a business, a tax advisor or solicitor could save you money and stress. Tide’s 24/7 legal helpline is included with some business accounts and can help with commercial property queries.
Photo by Point3D Commercial Imaging Ltd. on Unsplash
