A buyer of offices, shops, warehouses or other commercial property in England or Northern Ireland pays Stamp Duty Land Tax at 0% on the first £150,000 of the price, 2% on the next £100,000 and 5% on everything above £250,000. These are the rates for 2026 to 2027, and the price includes any VAT charged on the sale. The residential surcharges for additional dwellings and non UK residents do not apply to commercial property.

Which purchases use the non residential rates?

Section 55 of the Finance Act 2003 has one rate table for purchases made up entirely of residential property and another for everything else. Section 116 defines residential property as a building used or suitable for use as a dwelling, its garden or grounds, and rights that benefit them. Anything outside that definition is non residential.

GOV.UK lists the main examples: commercial property such as shops or offices, property that is not suitable to be lived in and cannot be made suitable, forests, farmland that is part of a working farm, other ground that is not part of a dwelling’s garden or grounds, and six or more residential properties bought in a single transaction. Section 116(3) adds buildings used as hotels or inns, hospitals, care homes providing personal care, children’s homes and halls of residence for further or higher education students. Section 116(7) treats six or more separate dwellings bought in one transaction as non residential.

A purchase that mixes residential and non residential elements, such as a shop with a flat above, is also taxed on the non residential table. That boundary, and the tribunal cases on paddocks and grounds, is covered in SDLT on mixed use and non residential property.

How do the bands work?

SDLT is charged on each slice of the consideration at the rate for that slice, not on the whole price at the top rate.

Portion of the price Rate
Up to £150,000 0%
£150,001 to £250,000 2%
Above £250,000 5%

GOV.UK’s own example is a freehold commercial property bought for £275,000: nothing on the first £150,000, £2,000 on the next £100,000 and £1,250 on the last £25,000, a total of £3,250. Above £250,000 the effective rate climbs towards 5% but never reaches it, because the first £250,000 always carries at most £2,000.

A purchase below £150,000 still usually needs a return. GOV.UK says you must still send an SDLT return for most transactions under £150,000, and the return must be filed within 14 days of completion; see the SDLT return deadline and penalties.

Does VAT on the price increase the SDLT?

Yes. Paragraph 2 of Schedule 4 to the Finance Act 2003 says the chargeable consideration includes any VAT chargeable on the transaction. SDLTM03800 confirms this applies even where the buyer can recover the VAT as input tax. So when the seller has opted to tax a commercial building, the buyer pays SDLT on the VAT inclusive price.

Two situations reduce the figure. First, VAT that only becomes chargeable because of an option to tax made after the effective date is excluded. Second, where a sale meets the conditions for a transfer of a going concern, no VAT is charged and SDLTM03800 says the chargeable consideration is the VAT exclusive amount. If the conditions are not met and VAT is charged, SDLT is due on the VAT inclusive price. See the option to tax and transfer of a going concern.

What does a worked example look like?

Illustration only. An investor buys a let office building for £800,000. The seller has opted to tax.

Slice Sold with VAT (£960,000) Sold as a going concern (£800,000)
First £150,000 at 0% £0 £0
Next £100,000 at 2% £2,000 £2,000
Remainder at 5% £710,000 at 5% = £35,500 £550,000 at 5% = £27,500
Total SDLT £37,500 £29,500

The £8,000 difference is 5% of the £160,000 VAT. Even if the investor recovers the VAT itself, the extra SDLT is a real cost, which is why buyers of tenanted buildings look closely at whether the going concern conditions can be met.

What if the price covers more than the property?

When a business is bought with its premises, the price usually covers goodwill, equipment and stock as well. Paragraph 4 of Schedule 4 requires a just and reasonable apportionment, and SDLTM04000 says the figure the parties agree may not be just and reasonable, so the purchaser must reconsider it before completing the return.

Not everything described as goodwill escapes. SDLTM04005 explains that SDLT is a charge on property including buildings, structures and fixtures, and that some goodwill is inherent in the property itself; only goodwill that is separate from the property falls outside the charge. Under SDLTM04010, fixtures are chargeable, while chattels are not if the price attributed to them is genuine, separately negotiated and evidenced in the conveyancing, at open market value. HMRC names chattel apportionment as an area it may enquire into.

How are commercial leases taxed?

A new commercial lease is taxed in two parts that are added together: any premium, using the table above, and the net present value of the rent. GOV.UK gives the rent bands as 0% up to £150,000 of net present value, 1% from £150,001 to £5,000,000, and 2% above £5,000,000. If you buy an existing lease by assignment you pay SDLT only on the price paid. The calculation is explained in SDLT on leases.

Do the residential surcharges or the 17% rate ever apply?

No. GOV.UK describes the 5% higher rates as applying when buying a new residential property means you will own more than one, and the 2% surcharge for buyers who are not UK resident as applying to residential property. The 17% rate for companies applies to residential property costing more than £500,000. A company, a pension fund or an overseas investor buying a shop or office pays exactly the same SDLT as a UK individual. For residential buyers this gap is what makes the classification of a mixed purchase worth so much.

Buying several units from the same seller can increase the bill. GOV.UK warns that you may pay a higher rate for multiple purchases or transfers from the same seller, because linked transactions are taxed on their combined price; see SDLT linked transactions.

What mistakes come up most often?

  • Leaving VAT out of the consideration when the seller has opted to tax.
  • Assuming a sale is a going concern without checking that the VAT conditions are actually met.
  • Deducting a round sum for goodwill or equipment with no valuation or separately negotiated price behind it.
  • Treating a building used as a hotel as residential, or a house with a large paddock as non residential, without looking at section 116 and the case law.
  • Forgetting the separate rent calculation on a new lease.
  • Not filing a return for a purchase below £150,000.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.