Tax laws are constantly evolving and can have a significant impact on commercial property owners. These laws determine the taxes that commercial property owners are required to pay, which can significantly affect their finances and overall investment decisions. Understanding these tax laws is crucial for property owners to manage their tax liabilities and minimise financial risks.

Importance of Understanding Tax Laws

The constantly changing tax laws can significantly impact the financial health of commercial property owners. Failing to comply with these laws can result in heavy penalties and even legal consequences. Therefore, it is important for property owners to stay informed about any changes in tax laws to avoid any financial or legal implications.

Types of Taxes on Commercial Properties

A. Business Rates

1. Definition and purpose

Business rates are local taxes commercial property owners pay to their local authority. These taxes fund local services such as waste collection, infrastructure, and emergency services. The amount of tax payable is determined by the rateable value of the property and the local tax rate set by the government.

2. Calculations and Payment

The government’s Valuation Office Agency determines a commercial property’s rateable value based on its rental value. The current business rate multiplier is 49.1p, which is applied to the rateable value to determine the annual tax liability.

3. Changes in Tax Exemption

In the past, small businesses with a rateable value of £6,000 or less were eligible for small business rate relief. However, in 2020, the UK government introduced 100% rates relief for small businesses with a rateable value of £15,000 or less. This has provided much-needed relief to small businesses struggling with the financial impact of the pandemic.

B. Capital Gains Tax

1. Definition and Purpose

Capital gains tax (CGT) is the tax paid when a property that has increased in value is sold. Commercial properties are subject to CGT, which is payable on the capital gain (the difference between the purchase price and sale price).

2. Calculation and Payment

The current CGT rate for commercial properties is 20%. However, this may vary depending on the individual’s tax band. The tax liability is calculated by deducting the annual CGT allowance from the capital gain, and then applying the 20% tax rate.

3. Changes in Tax Rates

The government introduced a new 2% surcharge for non-UK residents selling residential or commercial property law in the UK. This new non-resident capital gains tax (NRCGT) aims to level the playing field for UK residents and non-residents when selling UK properties.

C. Stamp Duty Land Tax

1. Definition and Purpose

Stamp Duty Land Tax (SDLT) is a tax the property buyer pays when purchasing a property with a value over a certain threshold. Commercial properties are subject to SDLT, which is payable on the purchase price of the property.

2. Calculations and Payment

The current SDLT threshold for commercial properties is £150,000, with a tax rate of 0% for properties valued between £0-£150,000, and 2% for properties valued between £150,001-£250,000. The tax rate increases with the property value, with a maximum rate of 5% for properties valued over £250,000.

Recent Changes in UK Tax Laws Affecting Commercial Property Owners

A. Introduction of Non-Resident Capital Gains Tax

1. Definition and Purpose

The 2% surcharge on non-UK residents selling UK properties was introduced, bringing non-resident commercial property owners into the UK tax net.

2. Impact on Non-UK Residents

Prior to the introduction of NRCGT, non-UK residents were not subject to CGT when selling UK properties. The new tax has significantly increased the tax liability for these property owners, making it important for them to seek professional tax advice to understand their obligations and potential planning opportunities.

B. Increase in Stamp Duty Land Tax for Second Homes

1. Definition and Purpose

From April 2016, an additional 3% stamp duty charge was introduced for anyone purchasing a second home or buy-to-let property in the UK. This applies to both UK and non-UK residents.

2. Impact on Property Investors

The increased stamp duty rates have made it more expensive for investors to purchase additional properties. This has led to a decline in the number of buy-to-let investment properties and potentially affected rental yields for commercial property owners.

C. Changes in Business Rates Relief

1. Increase in Small Business Rates Relief

The government’s recent increase in small business rates relief from £6,000 to £15,000 has provided much-needed financial support to small businesses, particularly during the pandemic.

2. Introduction of Transitional Relief

In addition to the increase in small business rates relief, the government has introduced transitional relief for properties affected by the revaluation. This aims to ease the financial burden for businesses facing a significant increase in their business rates.

3. Impact on Business Owners

These changes have significantly reduced the business rates burden for small businesses, providing them with much-needed relief during these uncertain economic times.

How Changes in Tax Laws Affect Commercial Property Owners

A. Financial Implications

Changes in tax laws can significantly affect the financial health of commercial property owners. Increases in tax rates or the introduction of new taxes can result in higher tax liability and reduced profits for property owners. This can also decrease the appeal of commercial properties to potential investors, causing a decline in property values.

B. Changes in Investment Decisions

Tax laws can also influence commercial property owners’ buying and selling decisions. Increases in tax rates or the introduction of new taxes can make it less attractive for investors to purchase or hold on to commercial properties. This can lead to changes in investment strategies and potentially impact the development plans for these properties.

C. Compliance and Administrative Burden

Staying compliant with tax laws can be a complex and time-consuming process for commercial property owners. Tax laws are constantly changing, and failure to keep up with these changes can result in penalties or additional tax liability. Accurate record-keeping is essential to ensure compliance and minimise the risk of tax investigations.

Strategies for Commercial Property Owners to Adapt to Tax Law Changes

A. Seek Professional Advice

Tax laws can be complex and constantly evolving, making it important for commercial property owners to seek professional tax advice. This will ensure that they are aware of any changes in tax laws and can plan accordingly to minimise their tax liabilities.

B. Consider Tax-Efficient Ownership Structures

Commercial property owners can also utilise tax-efficient ownership structures to reduce their tax liability. This may include using a limited company to hold the property or setting up a Real Estate Investment Trust (REIT).

C. Utilize Tax Reliefs and Exemptions

There are various tax reliefs and exemptions available for commercial property owners, such as capital allowances and business rates relief schemes. These can help reduce the tax burden and increase profitability.

Potential Future Changes in UK Tax Laws for Commercial Properties

A. Introduction of Digital Tax

The UK government has been discussing the introduction of a digital tax, which would require businesses to report their tax liabilities digitally. This would increase the administrative burden for commercial property owners and potentially impact their tax compliance.

B. Reforms to Capital Gains Tax

There have been calls for the government to increase the rates of CGT and potentially abolish the principal private residence relief. This could significantly impact individuals and businesses looking to sell their properties in the future.

C. Increased focus on Tax Audits

The UK government has been focusing on cracking down on tax avoidance and evasion, which could result in an increase in tax audits for commercial property owners. This emphasises the importance of staying compliant and proactively planning to minimise tax liabilities.


Tax laws can significantly impact commercial property owners, affecting their finances and investment decisions. Changes in tax rates, exemptions, and reliefs can result in an increase in tax liability and administrative burden. Commercial property owners must stay informed about any changes in tax laws. To successfully navigate through the constantly changing tax landscape, commercial property owners must proactively plan to minimise their tax liabilities and comply with tax laws. Seeking professional advice and utilising tax-efficient strategies can help owners adapt to any changes and maintain a profitable property portfolio.