On 17th March 2016, Stamp Duty Land Tax (SDLT) rates for commercial properties were changed to graduated rates, akin to the changes made previously to residential properties. Announced in the Chancellor’s Budget speech, these followed significant changes to property tax in the three budgets that came before.
The Chancellor confirmed that the new tax rates will be reformed to a slice system which is to apply to the value of the property over each band, unlike the previous system where they apply to the whole value of the transaction. Could this be a helpful change for your business?
The Chancellor George Osborne said: “At the moment, a small firm can pay just £1 more for a property and face a tax bill three times as large. That makes no sense.
‘These reforms raise £500m a year. And while 9% will pay more; over 90% will see their tax bills cut or stay the same.”
The new rates and tax bands:
•0% for the portion of the transaction value up to £150,000;
•2% between £150,001 and £250,000; and
•5% above £250,000.
These new rates are to provide a boost for small business and are intended to encourage their expansion. As a result of these new rates buyers of commercial property worth up to £1.05m will pay less in stamp duty. Under the previous system a commercial property on the market for £270,000, would result in a bill of over £8,000 in stamp duty. Under the new graduated system, the SDLT will be £3,000.
There are also changes to the Stamp duty rates for leasehold rent transactions, with a new 2% rate on leases with a net value over £5m added to the existing graduated system in place on such transactions. All leasehold rent transactions up to £5m will remain unaffected.
Sounds confusing? To ensure you have the right information to keep your business financially healthy, make sure you have an experienced accountant to offer you the advice you need. Book an appointment with Newton Magnus today.
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