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Reduced stamp duty focuses attention on commercial property purchase via a pension fund.

Stamp Duty from March 2016

We are often asked what rates the stamp duty is due on commercial property following the changes that took place in March 2016.

Stamp duty is now tiered, which when considering commercial properties for purchase within pension funds is tending to mean that the stamp duty due is lower.

Prior to March 2016, the stamp duty was fixed as follows:

 

Purchase Price SDLT rate
Up to £125,000 Zero
Over £125,000 to £250,0000 1%
Over £250,000 to £500,000 3%
Over £500,000 to £1 million 4%
Over £1 million to £2 million 5%
Over £2 million from 22/03/2012 7%
Over £2 million (purchased by certain pensions, including corporate bodies) from 21 March 2012. 15%

Post March 2016, it is tiered as follows:

 

Purchase Price SDLT rate
Up to £150,000 Zero
The next £100,000 (the portion from £150,001 to £250,000) 2%
The remaining amount (the portion above £250,000) 5%

 

What difference does the new stamp duty rates make to commercial property purchase?

For example, consider a typical pension commercial property purchase of £300,000.

If you had bought this before March 2016, you can see that the stamp duty payable would have been £9,000 but buying the property post March 2016, the stamp duty payable is now £4,500 a significant reduction of 50%.

This positive move for commercial property alongside the negatives for residential: these being increased stamp duty for second homes and loss of tax relief on the interest on the debt for higher earners, means that commercial property is looking like a serious competitor to residential. What better way to hold commercial property than through a pension fund?

If you would like to calculate the stamp duty that may be payable on a commercial property purchase, there is a stamp duty calculator on the HMRC website available to use here.

If you would like further information on holding commercial property in a pension fund, please speak to our commercial property technical team on 01772 555073 or read our technical guides.

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