Commercial property has its own stamp duty rates, and they are lower than residential. If you are buying a shop, office, or industrial unit, the rates are 0% up to £150,000, 2% from £150,001 to £250,000, and 5% above £250,000.
On a £500,000 commercial unit, your SDLT is 0% on the first £150,000, 2% on the next £100,000, and 5% on the final £250,000. That is £0 plus £2,000 plus £12,500, which equals £14,500. Compare that to a residential property at the same price, where the stamp duty would be £15,250 for a main home or £40,000 for a second home. The saving is significant.
The additional dwelling surcharge does not apply to commercial property, even if you own other properties. This makes commercial SDLT much more straightforward.
Mixed-use properties can get interesting. If you buy a shop with a flat above, the entire purchase is treated as commercial for SDLT purposes if the commercial element is more than half the value. This can save you thousands compared to buying a purely residential property.
If you are considering moving from residential to commercial investment, lower stamp duty is one of the underappreciated benefits. On a £1 million commercial purchase, your SDLT is £44,250 compared to £55,500 for a residential main home or £108,750 for a second home.
The formula
SDLT = 0% × min(price, 150,000)
+ 2% × min(max(price - 150,000, 0), 100,000)
+ 5% × max(price - 250,000, 0)
A worked example
£400,000 commercial: 0 + 2% × 100,000 + 5% × 150,000 = 2,000 + 7,500 = £9,500
Why this matters
Commercial SDLT rates are significantly lower than residential. Mixed-use properties can also qualify for commercial rates if the commercial element is dominant. Factor this into your acquisition planning.
Running these calculations before you buy is the difference between a good investment and an expensive lesson. Xelox Properties can help you evaluate any deal.