Key facts
- Commercial (non-residential) SDLT rates are 0%, 2%, and 5% on progressive slices.
- The nil-rate band for commercial property is £150,000.
- The higher-rate surcharge for additional dwellings does not apply to commercial property.
- The non-resident surcharge does not apply to commercial property.
- Mixed-use properties (residential + commercial) are taxed at the commercial rates.
Commercial SDLT Rate Bands
The following rates apply to purchases of non-residential (commercial) property and to the freehold transfer or assignment of an existing non-residential lease:[1]
| Purchase Price Band | SDLT Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 – £250,000 | 2% |
| Over £250,000 | 5% |
These rates are calculated on a progressive “slice” basis, the same as residential SDLT.
What Counts as Non-Residential?
Non-residential property includes any property that is not a dwelling. Common examples:[3]
- Shops and retail premises
- Offices and business centres
- Factories, warehouses, and industrial units
- Agricultural land and farmland
- Forests and woodland
- Pubs, restaurants, and hotels
- Development sites (where no dwelling currently exists)
- Land without planning permission for residential use
Six or more dwellings: A purchase of six or more residential properties in a single transaction is treated as a non-residential purchase for SDLT purposes, attracting the lower commercial rates.[2]
Worked Example
A business buys an office building for £500,000:
| Slice | Amount | Rate | SDLT |
|---|---|---|---|
| £0 – £150,000 | £150,000 | 0% | £0 |
| £150,001 – £250,000 | £100,000 | 2% | £2,000 |
| £250,001 – £500,000 | £250,000 | 5% | £12,500 |
| Total SDLT | £14,500 | ||
For comparison, a £500,000 residential property (standard rates) would attract £12,500 SDLT at the standard rates — but could be £30,000 with the additional dwelling surcharge. The commercial rates have a higher nil-rate threshold and a lower top rate.
No Surcharges on Commercial Property
Unlike residential SDLT, commercial property purchases are not subject to:[1]
- The 5% higher-rate surcharge for additional dwellings
- The 2% non-resident surcharge
- The 15% flat rate for residential properties over £500,000 held in corporate “envelopes”
This makes commercial property generally cheaper in SDLT terms, especially for companies and overseas buyers.
SDLT on Commercial Leases
When you take a new commercial lease (not a purchase), SDLT may be payable on two elements:[2]
- Lease premium (a lump sum payment) — taxed at the commercial rates above
- Rent — taxed on the net present value (NPV) of the total rent payable over the lease term
The NPV nil-rate threshold for non-residential leases is £150,000. Rent NPV above this is taxed at 1% (or 2% on the portion above £5,000,000).
VAT and Commercial SDLT
If the seller has exercised the option to tax (opted to charge VAT on the property), the VAT is included in the chargeable consideration for SDLT purposes. This means SDLT is calculated on the VAT-inclusive price.[1]
For example, a £500,000 commercial property with VAT at 20% has a total consideration of £600,000 for SDLT purposes.
Tip: If you are a VAT-registered business buying a commercial property subject to VAT, you can recover the VAT through your VAT return — but you still pay SDLT on the VAT-inclusive price. The SDLT cost is not recoverable.
Frequently Asked Questions
What counts as non-residential property for SDLT?
Non-residential property includes shops, offices, factories, warehouses, agricultural land, forests, and any property that is not a dwelling. A building that was previously residential but has been converted to commercial use (e.g. an office) is treated as non-residential.
Are commercial SDLT rates lower than residential?
Yes. The maximum commercial SDLT rate is 5% (on the portion above £250,000), compared to 12% for residential property. There are no additional surcharges for second properties or non-residents on commercial purchases.
What rate does a flat above a shop pay?
A flat above a shop is classified as mixed-use property and attracts the lower commercial SDLT rates, even though it includes a dwelling. This can result in significant savings compared to the residential rates.
Is there SDLT on agricultural land?
Yes. Agricultural land is treated as non-residential property for SDLT purposes, so the commercial rates apply. SDLT is charged on the purchase price in the usual way.
Further Reading
- Mixed-Use Property & SDLT — when commercial rates apply to mixed properties
- SDLT on Leases (NPV) — how SDLT on rent is calculated
- VAT and SDLT Interaction — the option to tax and its SDLT implications
- Residential SDLT Rates (2026/27) — residential rates for comparison
Looking for simple tax software?
#GoFile is HMRC-recognised and trusted by 50,000+ UK businesses. Set up in minutes, file with confidence.
Get Started For FreeNo credit card required · Cancel anytime