Commercial Property in the UK

Real estate in the UK is a popular asset class. The stability of its legal and financial systems make for a reliable return. In addition, the drop in sterling following the Brexit vote means you can get more for your money. Recent tax rises on the holding of second homes in England and Wales means smart investors are turning to commercial property as their preferred vehicle. We, at Hikma, have experience in structuring investments in commercial property in a tax efficient and Shariah compliant manner. We set out below the taxes applicable when purchasing and holding commercial property.

Transfer duty

This is referred to as Stamp Duty Land Tax (SDLT) and is payable on the purchase price plus VAT – see below. The applicable rates are as follows:

Purchase Price Rate
£0-150,000 0%
£150,001-250,000 2%
More than £250,000 5%

These are better than the rates for residential property which are as follows:

Purchase Price Rate Rate for second home
£0-£125,000 0% 3% above £40,000
£125,001-£250,000 3% 5%
£250,001-£925,000 5% 8%
£925,001-£1,500,000 10% 13%
More than £1,500,000 12% 15%

Income Tax

Income tax should be payable at the rate of 20% on the rents received. This can be reduced by making deductions against the rent received.