Budget 2016: how will the new stamp duty rates affect you?

George Osborne’s 8th budget, delivered on 17th March 2016, delivered some shock changes which could affect commercial property owners and landlords negatively. Osborne unveiled an increase on stamp duty for high value commercial properties which critics believe will slow growth within the industry.

Osborne said the new rates will be 0% for the portion of the transaction value between £0 and £150,000; 2% between £150,001 and £250,000; and 5% above £250,000. Before this change, rates applied to the whole transaction value but now will apply to the value of the property over each tax band; similar to the residential system.

Stamp duty rates for leasehold rent transactions have also changed. There is now a new 2% stamp duty rate on leases with a net present value of over £5m. Osborne believes that the changes will benefit owners of small businesses, such as pubs or shops, who also own the properties from which they operate. He said: “If you buy a pub in the Midlands worth, say, £270,000, you would today pay over £8,000 in stamp duty.” From 17th March, “you will pay just £3,000. It’s a big tax cut for small firms.”

Those operating in the commercial property industry have reacted negatively to the higher rate on larger purchases. The British Property Federation called the changes an “out of the blue raid on commercial property transactions”. They also said that the higher top rate would damp regional growth, as it made buying assets, from office buildings to stores, more expensive.

Chief executive of Lambert Smith Hampton, Ezra Nahome, said: “In the past, reform to commercial property stamp duty has been introduced at a time when the market has been particularly buoyant. At the moment, however, investors are already concerned about the outlook for the global economy and the uncertainty caused the referendum on our continued EU membership […] This is not the right point in the cycle to be trying to extract more tax receipts from investors.”

Please comment below and tell us how the changes to stamp duty on commercial property will affect you.

If you would like any further advice on how this will affect you and your commercial property, please get in touch by commenting below or emailing holly@novaloca.com