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What Tax Do I Pay When I Sell a Commercial Property in UK?

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Are you considering selling a commercial property in the UK? If so, you’re likely wondering what taxes you must pay. Understanding the tax implications of selling a commercial property can be complex, but don’t worry, we’ve got you covered. In this article, we’ll break down the taxes you must pay and provide examples to help you understand.

Table of Contents

Capital Gains Tax (CGT)

When you sell a commercial property, you’ll need to pay Capital Gains Tax (CGT) on any profit you make. CGT is a tax on the profit you make from selling an asset, such as a commercial property. The rate of CGT you pay depends on your income tax band and the type of property you’re selling.

For example, let’s say you bought a commercial property for £200,000 and sold it for £300,000. You’ve made a profit of £100,000. If you’re a basic-rate taxpayer, you’ll pay 10% CGT on the profit, which is £10,000. If you’re a higher-rate taxpayer, you’ll pay 20% CGT, which is £20,000.

Corporation Tax

If you’re selling a commercial property through a limited company, you’ll need to pay Corporation Tax on the profit. Corporation Tax is a tax on the profits of a company, and the rate is currently 19%.

For example, let’s say your company bought a commercial property for £200,000 and sold it for £300,000. The company has made a profit of £100,000. You’ll need to pay Corporation Tax on the profit, which is £19,000 (19% of £100,000).

Do You Have to Pay Stamp Duty Land Tax (SDLT) When Selling a Commercial Property?

Yes, you do have to pay Stamp Duty Land Tax (SDLT) when selling a commercial property in England and Northern Ireland. SDLT is a tax on the acquisition of land and property, and it applies to both freehold and leasehold commercial properties. The rate of SDLT you pay depends on the purchase price of the property and the type of property being sold.

 

Rates for Freehold Commercial Properties

For freehold commercial properties, SDLT is charged at the following rates:

  • 0% on the first £150,000
  • 2% on the next £100,000 (£150,001 to £250,000)
  • 5% on the remaining amount above £250,000

 

Rates for Leasehold Commercial Properties

For leasehold commercial properties, SDLT is charged on both the lease premium (purchase price of the lease) and the net present value (NPV) of the annual rent. The rates are as follows:

  • 0% on the first £150,000 of the lease premium
  • 2% on the next £100,000 (£150,001 to £250,000)
  • 5% on the remaining amount above £250,000
  • 1% on the NPV of the annual rent between £150,001 and £5,000,000
  • 2% on the NPV of the annual rent above £5,000,000

 

Exemptions and Reliefs

There are some exemptions and reliefs available for SDLT on commercial properties.

For example, if the property is transferred as a result of divorce or inheritance, no SDLT is payable. Additionally, there are reliefs available for certain types of transactions, such as those involving charities or group companies.

 

Payment Deadline

The SDLT return must be submitted, and the tax paid within 14 days of the completion of the transaction.

What Tax Do I Pay When I Sell a Commercial Property in the UK
Selling a commercial property in the UK can be a complex process, but understanding the taxes you'll need to pay can help you plan and prepare.

VAT

There may be other taxes you need to pay when selling a commercial property, such as Value Added Tax (VAT) if you’re selling a property that’s subject to VAT.

Tax Reliefs

There are some tax reliefs available when selling a commercial property, such as Business Asset Rollover Relief, which allows you to defer paying CGT if you reinvest the profit in another business asset.

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