The stamp duty land tax (SDLT) surcharge for overseas buyers of residential property, which was was announced in the 2018 Budget, will be taking effect from 1 April 2021 and we anticipate that a lot of prospective buyers will be eager to ensure any property transaction is completed before these changes are made.
What is the SDLT surcharge?
Currently, buyers pay SDLT at specified rates, irrespective of where they live or their residence status. The effect of the new legislation is to increase the rate of SDLT payable on relevant transactions by 2%. This will be in addition to the 3% higher rates introduced in 2016 for “additional” properties and will result in a potential top rate of SDLT of 17% for purchases by overseas corporates.
It has been in the pipeline for well over two years, having been first announced in the 2018 Budget. Guidance will be issued by HMRC in advance of 1 April 2021 which will set out the practicalities of the residence test and provide a template of the updated SDLT return that will be needed to accommodate the new surcharge.
Who is impacted?
The surcharge applies to non-resident individuals, unit trusts, partnerships and corporates buying UK residential property, as well as beneficiaries under life-interest and bare trusts and trustees of other types of trust, subject to some limited exceptions, which we have listed below.
Individuals will generally not be subject to the 2% surcharge if they spend at least 183 days in the UK during the 12 months before the “effective date” of the transaction (usually the completion date) and ending 365 days after it.
Are there any exemptions?
- Residential property that is subject to the circa five percent commercial property rates;
- Purpose built student accommodation;
- Acquisitions of leases with less than 21 years to run; and
- Reversionary interests subject to a lease with more than 21 years to run.
Non-UK resident Stamp Duty tax bands
| Brackets | Standard Rate | Overseas Buyer SDLT (1st April 2021) |
| Up to £125,000 | 0% | 5% |
| £125,001 – £250,000 | 2% | 7% |
| £250,001 – £925,000 | 5% | 10% |
| £925,001 – £1.5m | 10% | 15% |
| over £1.5m | 12% | 17% |
If you have any questions with regards to the upcoming changes to SDLT as an overseas buyer, we would be delighted to assist. Call direct on + 44 (0) 207 993 4081 or simply send an email for a fast response.
