Budget 2020: 2% SDLT surcharge for non-residents

Budget 2020: 2% SDLT surcharge for non-residents

Mark Stemp, Partner, Private Clients
11/03/2020
Budget 2020: 2% SDLT surcharge for non-residents

From 1 April 2021 a 2% Stamp Duty Land Tax (SDLT) surcharge will apply on non UK residents purchasing residential property in England and Northern Ireland. The changes will affect non-UK resident individuals, Trusts and Companies. It may affect UK Companies owned by non-UK residents but this has not been confirmed and we await further details. Consideration of the residency status of the entity purchasing the property will therefore need to be considered. It remains to be seen how ‘non-resident’ will be defined for these purposes – fingers crossed it is not another new definition. 

In line with rules introduced from April 2016, if the acquisition is the purchase of a second home (and is not a replacement main residence), the 3% surcharge rules will also apply. 

Due to this non-resident surcharge, there is likely to be an increased level of activity in the short term for residential purchases as affected buyers look to complete their purchases before the change comes into effect. A similar spike in the level of activity was experienced prior to the introduction of the second property 3% surcharge in April 2016. The introduction of this non–resident surcharge is no surprise, although at the time of the election manifesto a 3% rate was proposed, so a 1% reduction will be welcome along with the ability to reclaim if the purchaser becomes resident within the following twelve months. 

Current residential property SDLT rates

Property or lease premium or transfer value Residential property SDLT rates
Up to £125,000  Zero
£125,001 - £250,000 2%
£250,001 - £925,000
5%
£925,001 - £1.5 million
10%
Greater than £1.5 million
12%

Example: if you are a non-UK resident individual purchasing a second residential property in England (and not replacing your main residence), with a value of £1 million, you will be subject to SDLT as follows:

Property or lease premium or transfer value Example: £1 million property  Residential property SDLT rates
+ 3% second property surcharge
+ 2% non-resident surcharge 
 Up to £125,000 £125,000
5%
£125,001 - £250,000 £125,000
7%
£250,001 - £925,000  £675,000
10%
£925,001 - £1.5 million
£75,000
15%

Due to this new non-resident surcharge, your SDLT liability would be £29,750 more compared to a UK resident individual purchasing a second residential property (not replacing a main residence).

The SDLT rules regarding Company purchasers and Annual Tax on Enveloped Dwellings and 15% SDLT still also apply.

The SDLT rules are complex. Depending on the circumstances of acquisition and intention for the property, SDLT reliefs may be available (for example: multiple dwellings, mixed-use rates etc.). We recommend you take advice before acquiring property to fully understand your SDLT exposure.

SDLT forms and the liability payment are due within 14 days of conveyance.

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Mark Stemp
Mark Stemp
Partner, Private Clients
London & Thames Valley