Stamp Duty Land Tax surcharge for overseas buyers

The Government has introduced new rules that mean overseas buyers of property in the England and Northern Ireland will have to pay an additional 2% tax on top of the normal Stamp Duty Land Tax (SDLT) rates.

This means that the surcharge is applied on top of:

  • First-time buyer rates
  • 3% additional dwellings charge
  • Higher rate applying to companies’ residential transactions of over £500,000
  • Flat 15% Annual Tax on Enveloped dwellings

The surcharge has come into effect on residential property purchases, whether freehold or leasehold, that were completed on or after 1 April, 2021.These rates apply even if you intend to live in the property once you have completed and regardless of whether you are a first-time buyer or not.

There are different rules in Wales, where the Land Transaction Tax (LTT) and the Land and Buildings Transaction Tax (LBTT) in Scotland apply.

Phillips commercial property solicitor Matthew Morris-Ashton, who also deals with residential conveyancing, said: “Non-UK tax residents and companies buying UK residential property should seek professional advice about SDLT, to find out whether they must pay the 2% overseas buyer’s stamp duty surcharge and whether they are able to claim a refund once it has been paid.”

“It is also important for UK companies purchasing residential property to be careful, where the company has non-UK resident shareholders. This is because companies like these could find themselves liable to the additional 2% rate.”

To give you an idea of how much SDLT you are likely to have to pay, use this SDLT calculator which is on the Government’s tax website.

UK Residence Test

A new test for UK residence will apply just for the purpose of determining whether the SDLT surcharge applies. This is different from the Statutory Residence Test.

The SDLT surcharge test will determine if an individual is a UK resident if he or she is present in the UK for at least 183 days during any continuous period that:

  • Begins with the day 364 days before the effective date of the chargeable transaction, and
  • Ends with the day 365 days after the effective date of the chargeable transaction.

Matthew said: “If the purchase is made jointly with a spouse or civil partner and the couple live together, then only one of them needs to be a UK resident. However, this will not apply if the non-resident spouse or civil partner makes the purchase alone.”

Can Non-UK Residents Apply for A SDLT Refund?

Non-UK residents can apply for a surcharge refund if they become UK-resident after submitting their land transaction return. They will have up to two years to amend their land transaction return so that they can claim a repayment.

Is it possible to avoid the SDLT surcharge by flipping?

Matthew cautiously said: “It is possible to avoid the surcharge when a non-UK resident off-plan buyer flips the property to a UK resident. In this situation no surcharge will be payable because the flipper gets full sub-sale SDLT relief.”

If you would like more information about the non-UK resident SDLT surcharge, please contact Matthew by emailing [email protected] or by calling 01256 854602.