The non-residential bands slice by slice, the shortcut, purchaser's costs, and the VAT and linked-purchase traps that change the figure at completion.
SDLT on a commercial (non-residential) purchase in England is charged in slices: nothing on the first £150,000, 2 per cent on the next £100,000 and 5 per cent on everything above £250,000. On an illustrative £12,000,000 office the tax is £589,500, an effective 4.91 per cent, and with agent's and legal fees the buyer's costs come to £805,500, or 6.71 per cent of the price.
Worked in full in Real Estate Transaction Due Diligence by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
| Portion of the price | Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,000 to £250,000 | 2% |
| Above £250,000 | 5% |
Each rate applies only to the slice of the price inside its band, as with income tax. Scotland (LBTT) and Wales (LTT) have their own taxes and bands, and rates change at fiscal events, so confirm the current table with HMRC before a figure goes into a bid. The calculation below is the method; the rates are the inputs.
First £150,000 at 0% = £0
Next £100,000 (£150,000 to £250,000) at 2% = £2,000
Remaining £11,750,000 at 5% = £587,500
SDLT = £589,500; effective rate = £589,500 ÷ £12,000,000 = 4.91%
Shortcut for any price above £250,000: SDLT = 5% × price − £10,500
Excel, price in B1: =MAX(0,MIN(B1,250000)-150000)*2%+MAX(0,B1-250000)*5%
The £10,500 is what the two lower bands save against a flat 5 per cent: £7,500 on the first £150,000 and £3,000 on the next £100,000. It is why the effective rate creeps up towards 5 per cent as the price rises but never reaches it.
| Item | Rate | £ |
|---|---|---|
| SDLT | 4.91% | 589,500 |
| Agent's fee | 1.0% | 120,000 |
| Legal fees | 0.5% | 60,000 |
| VAT on fees at 20% | 36,000 | |
| Purchaser's costs | 6.71% | 805,500 |
The buyer's gross outlay is £12,805,500. The fee rates are assumptions for illustration; survey, environmental and other diligence costs come on top and are usually treated separately. The result sits close to the 6.8 per cent allowance many UK valuers deduct for purchaser's costs on larger lots, which is no coincidence: that allowance is mostly the top SDLT band plus fees and VAT on them.
A buyer with an all-in budget, say £12,800,000 including costs, needs the maximum price, not the tax on a given price. Because SDLT above £250,000 is linear, the price can be solved directly:
Price × (1 + 5% + 1.8% fees with VAT) − £10,500 = budget
Price = (£12,800,000 + £10,500) ÷ 1.068 = £11,994,850
Check: £11,994,850 + SDLT £589,243 + fees £215,907 = £12,800,000
| Price, £ | SDLT, £ | Effective SDLT | Total costs |
|---|---|---|---|
| 200,000 | 1,000 | 0.50% | 2.30% |
| 500,000 | 14,500 | 2.90% | 4.70% |
| 2,000,000 | 89,500 | 4.47% | 6.28% |
| 12,000,000 | 589,500 | 4.91% | 6.71% |
| 50,000,000 | 2,489,500 | 4.98% | 6.78% |
VAT on the price. SDLT is charged on the consideration including any VAT. If the seller has opted to tax and the sale does not qualify as a transfer of a going concern, VAT at 20 per cent takes the chargeable consideration to £14,400,000 and SDLT to £709,500. The buyer may recover the VAT itself, but not the extra £120,000 of SDLT. That is one of the costs priced in what losing TOGC treatment costs a buyer.
Linked transactions. Three shop units of £200,000 each bought from the same seller as one deal are linked, so the bands apply to the £600,000 total. SDLT is £19,500, not three times £1,000. The £16,500 difference is the kind of item that appears late in a completion statement when the cost model priced each unit alone.
Illustrative. Leases, share purchases, reliefs and the higher rates for some corporate purchasers of dwellings follow different rules. This is not tax advice.
For a commercial purchase above £250,000 in England, SDLT is 5 per cent of the price less £10,500: £589,500 on £12,000,000, and £805,500 of purchaser's costs once fees are added. Confirm the VAT position and whether any purchases are linked before fixing the figure. The book treats the closing figures as part of the price, and the free workbook for the book asks which diligence workstreams paid for themselves. For how the costs feed the yield, see net initial yield with purchaser's costs.
It rises with the price towards 5 per cent but never reaches it, because the first £250,000 is taxed at lower rates. On the bands used here it is 0.50 per cent on £200,000, 2.90 per cent on £500,000, 4.47 per cent on £2,000,000, 4.91 per cent on £12,000,000 and 4.98 per cent on £50,000,000.
On the rent, not a price. The rents over the term are discounted at 3.5 per cent to a net present value, and the non-residential lease bands are 0 per cent up to £150,000 of NPV, 1 per cent to £5,000,000 and 2 per cent above. An illustrative 10-year lease at £100,000 a year with no VAT has an NPV of £831,661 and SDLT of £6,817. Any premium is charged separately at the purchase rates.
Linked purchases from the same seller are taxed on their combined price. Three units of £200,000 bought together are taxed as £600,000: SDLT of £19,500 instead of three times £1,000, a difference of £16,500.
This article is one calculation from Real Estate Transaction Due Diligence. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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