Budget 2016: Commercial Property stamp duty reform

In the budget update 16 March 2016 Chancellor George Osborne announced reform for Stamp Duty Land Tax (SDLT) on Commercial Property.

At present Commercial Property is applied on a different basis to residential property.  The changes being made to Commercial Property are to bring it in line with the method for Residential Property (for the avoidance of doubt it is not identical.

From 17 March 2016 the rates will apply to the value of the property over each tax band, unlike the current system where they apply to the whole transaction value.  The SDLT will be payable on the portion of the transaction value which falls within each tax band.

Mr Osborne said: ‘This new tax regime comes into effect from midnight 16 March 2016. There are transitional rules for purchasers who have exchanged, but not completed before midnight.’

‘These reforms raise £500m a year. And while 9% will pay more, over 90% will see their tax bills cut or stay the same’.

The new regime is:

• £150,000 or less – 0 SDLT
• £150,001 to £250,000 – 2% of the consideration in this range (i.e. a maximum of £2,000 SDLT)
• £250,001 and above – 5% of the consideration in this range.

Therefore, under the new regime if you buy for £300,000 you would pay:

• £150,001 to £250,000 – 2% of £100,000 = £2000
• £250,000 to £300,000 – 5% of £50,000 = £2,500

Total SDLT £4,500 (Under the previous regime it would have been £9,000)

For transactions less than £1,050,000 the SDLT is lower than before, for transactions above £1,050,000 the SDLT will go up.  For every £100,000 over £1,050,000 the amount of SDLT will increase by £1,000.  These changes take effect from midnight tonight (16 March 2016) unless a contract has exchanged by midnight in which case the old rule applies.

For those transactions which have already exchanged contracts but not completed when the changes come into force, transitional rules will ensure taxpayers will not lose out.