The Budget 2016 - Stamp Duty on Commercial Property
George Osborne has extended his radical reform of residential property stamp duty to the commercial property sector. From midnight on 17 March, Stamp Duty on commercial property will increase on the highest value properties, while reducing lower down.
Before the announcement, stamp duty rates for commercial property were:
Up to £150,000 - freehold or leasehold with annual rent under £1,000 0%
Up to £150,000 - leasehold with annual rent of £1,000 or more 1%
£150,001 to £250,000 1%
£250,001 to £500,000 3%
Over £500,000 4%
Stamp duty on commercial property will now work in a similar way to income tax. Rather than paying the same tax rate on the whole value of the property depending on which price bracket it falls into, the rates will only apply to the portion of the price that falls into it. Before, paying just £1 more on a property price could land you with a stamp duty bill thousands of pounds higher because it fell into a higher bracket.
From 17th March 2016 the new rates will be:
Up to £150,000 0%
£150,001 to £250,000 2%
Over £250,000 5%
Based on the new rules, stamp duty will be higher for properties valued above £1,050,000, but will be lower for properties below this figure. Comparison costs are as shown below:
Mr Osborne said the new system would raise an extra £500m a year and only 9% of transactions would end up paying more stamp duty than before. "So, if you buy a pub in the Midlands worth, say, £270,000, you would today pay over £8,000 in stamp duty. From tomorrow you will pay just £3,000" Osborne told the House of Commons. "It's a big tax cut for small firms. All in a Budget that backs small business."
The British Property Federation (BPF) called it a raid. "Commercial property investment can often act as the catalyst for regional growth and as the economy has recovered investment has been spreading out from London to the UK's regions, but will now undoubtedly slow," said Melanie Leech, chief executive of the BPF.
Our view is that the change is good news for the small investor.
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