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During last week’s budget we heard that the Stamp Duty Land Tax (SDLT) holiday would be extended until 30 June for residential properties with values up to £500,000, with a final deadline of 30 September exclusively for transactions of properties valued up to a maximum of £250,000.

Currently, anyone can benefit from the SDLT holiday; it extends to both UK residents and non-UK residents. However, from 1 April 2021, non-UK residents will be required to pay a new Stamp Duty surcharge of 2% when purchasing residential property in England and Northern Ireland. There is no current charge for purchases made in Wales and Scotland.

How Much SDLT will Non-UK Residents Have to Pay?

Non-UK residents will be obliged to pay the 2% surcharge when they purchase a major interest (ie. A freehold or leasehold ownership) of a property over a value of £40,000. Leases with 7 years or less remaining will be exempt.

The 2% charge is added onto the standard rates of SDLT in the UK (outside of the SDLT holiday). If the purchase made by a non-UK resident buyer is a second home or buy-to-let investment or being purchased by a company, they will have to pay the 2% Stamp Duty surcharge on top of the 3% tax that is currently payable on second homes or investment purchases or by company purchasers.

Therefore, in most cases, overseas buyers could see themselves paying a minimum of 5% additional tax on their property purchase:

 

Property or lease premium/transfer value	SDLT rate	SDLT Rate with Surcharge	SDLT Rate with Surcharge and additional 3% surcharge for second homes or investments
Up to £125,000	0	2%	5%
The next £125,000 (portion from £125,001 to £250,000)	2%	4%	7%
The next £675,000 (portion from £250,001 to £925,000)	5%	7%	10%
The next £575,000 (portion from £925,000 to £1.5 million)	10%	12%	15%
The remaining amount (anything above £1.5 million)	12%	14%	17%

 

Who Qualifies as a Non-UK Resident?

HM Government has set out specific criteria which determine whether you classify as ‘UK resident’ for the purposes of the Stamp Duty surcharge. In the 12 months prior to the date of your property purchase, you must have been resident in the UK for a minimum of 183 days to qualify as UK resident. If you have not spent this minimum number of days in the UK, you will have to pay the 2% surcharge.

If you are buying the property as a couple, or as a joint purchase, and one of the buyers involved classifies as non-UK resident, the surcharge will still have to be paid.

In addition, if a residential property is purchased by a UK resident company that is managed by non-UK residents, the surcharge will also be payable in most cases.

Lawrence Stephens’ Real Estate team has decades of experience in acting for overseas buyers making property purchases in the UK. If you have any questions about the incoming SDLT surcharge for non-UK residents, please feel free to get in touch with us at enquiries@lawstep.co.uk.