Excerpt from; Stamp Duty Land Tax Guide For Property Investors.

Non Residential SDLT Rates

(SDLT Rates and Calculations)

➤ Non-residential property purchases, like a warehouse, often have lower Stamp Duty Land Tax (SDLT) rates compared to residential properties.

SDLT rates for non-residential properties are usually different from residential rates. For example, a company buying a warehouse for £800,000 might pay a lower SDLT rate compared to a residential property of the same value.

The rates can vary depending on the size and type of non-residential property.

Property or lease premium or transfer value 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%

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Non-Residential Property

Non-residential properties play a crucial role in the real estate sector, primarily distinguished from residential properties by their use, function, and the intention behind their acquisition. 

Non-Residential Properties

  1. Commercial Properties
    • Offices: Buildings or spaces used for business activities, excluding any living accommodations.
    • Shops: Retail establishments ranging from small boutiques to large supermarkets.
    • Factories: Industrial properties used for manufacturing goods, often equipped with heavy machinery.
    • Warehouses: Storage facilities used for holding goods before they are distributed for sale.
  2. Agricultural Land
    • Includes fields used for farming crops or grazing animals.
    • Structures on the land such as barns or stables, provided they are used for agricultural purposes and not for residential living.
  3. Forests
    • Woodland areas primarily used for forestry operations, including timber production.
    • These areas are considered non-residential unless there are dwellings within them that are used as homes.
  4. Mixed-Use Properties
    • Properties that combine elements of residential and commercial use, such as a building with retail shops on the ground floor and apartments above.
    • For SDLT purposes, these are often assessed under non-residential rules if the commercial or non-residential portion is significant.

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Criteria for Classifying Non-Residential Properties

The classification of a property as non-residential hinges on its utilisation at the time of the transaction. Key indicators include:

  • Intended Use: The purpose for which the property is currently used or intended to be used in the near future.
  • Physical Suitability: Whether the property’s physical characteristics and facilities support non-residential functions.
  • Legal Restrictions: Any legal covenants or zoning laws that restrict the property’s use to non-residential activities.

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Edge Cases and Debatable Scenarios

Certain properties sit on the borderline between residential and non-residential classifications. These edge cases often require careful consideration and sometimes legal interpretation to determine their proper classification for SDLT purposes.

  1. Derelict Buildings
    • A property that was originally residential but has become derelict might be reclassified as non-residential if it’s no longer suitable for habitation and requires extensive reconstruction.
    • Example: An abandoned house that has deteriorated to the extent that it lacks basic living facilities like plumbing, heating, or structural integrity may be treated as non-residential for SDLT if the cost and extent of repairs are prohibitive.
  2. Residential Buildings Converted for Commercial Use
    • Properties originally built for residential use but have been converted for use as offices or commercial premises.
    • Example: A townhouse converted into a dental clinic where no one resides, and the primary function is commercial.
  3. Properties with Temporary Non-Residential Use
    • Properties intended for residential use but temporarily used for non-residential purposes.
    • Example: A residential flat used as a short-term rental property for tourists may still be classified as residential for SDLT purposes, despite its temporary use as a commercial accommodation.
  4. Mixed-Use Properties with Minor Residential Components
    • Properties predominantly used for commercial purposes but containing minor residential elements.
    • Example: A large warehouse with a small caretaker’s flat. The determination of whether this property is non-residential may depend on the proportion and significance of the residential use in the context of the overall property’s function.

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