From the 1st of April 2021 a new 2 percent Non-UK resident surcharge will apply to Stamp Duty and Land Tax in England and Northern Ireland. We have gathered some useful information for conveyancers and purchasers below.
The contents on this page should be treated as guidance only.
What is the Non-UK Resident Surcharge?
The Non-UK Resident SDLT Surcharge is an additional tax element for residential property purchases, both freehold, and leasehold. An additional 2% is charged on top of the normal SDLT amount if any purchaser is a non-UK resident.
If the purchase (consideration) amount is below the £40,000 threshold the surcharge does not apply.
It also applies to certain purchases by companies where the company is directly or indirectly controlled by a non-UK resident. See more on the HMRC website; https://www.gov.uk/guidance/rates-of-stamp-duty-land-tax-for-non-uk-residents
We have built a helpful calculator to help calculate SDLT for a range of scenarios including the surcharge and any applicable SDLT holiday which you can find here; https://www.intouch.cloud/land-tax-calculator-sdlt-ltt-with-and-without-the-holiday-applied
What should conveyancers do?
Conveyancers should, if they haven’t already, gather information regarding the purchasers’ residency status and update their SDLT calculations if the transaction is due to complete after the 31st of March 2021. Ensure that your clients are aware of this to avoid any unnecessary surprises.
Conveyancers should also update any quotation calculators, tools, or tax guidance to reflect the change as soon as possible on their websites and other communications.
How does the surcharge relate to the on-going SDLT Holiday?
The 2% surcharge is applied to SDLT for any purchase and is not affected by the current SDLT holidays. I.e. if the transactions completed before the 1st of July 2021 with a property price less than £500,000, and over £40,000, the surcharge will still apply, even though no further SDLT is due.
Why was the Non-UK Resident SDLT Surcharge introduced?
The surcharge was introduced by the government to reduce house price inflation driven by foreign buyers. Their aim is to help more people onto the property ladder by reducing house price rises driven by foreign buyers, a problem most pertinent in and around London.
For more details you can read the government's consultation here; https://www.gov.uk/government/consultations/stamp-duty-land-tax-non-uk-resident-surcharge-consultation
Does the non-UK resident surcharge apply in Scotland and Wales?
No. The surcharge only affects SDLT and not LTT or LBTT.
What is the definition of a non-UK resident?
According to the government website, the definition of Non-UK resident for individuals is;
“Individual buyers are non-UK resident in relation to the transaction if they are not present in the UK for at least 183 days during the 12 months before their purchase.”
Please note that this definition differs from the statutory residence test.
For further information and examples please see; https://www.gov.uk/guidance/rates-of-stamp-duty-land-tax-for-non-uk-residents
Is the non-UK resident surcharge applicable when buying an additional property?
Yes, the surcharge is applicable on top of any additional property rates.
Can you get a refund for the non-UK resident SDLT surcharge?
Yes. Individual buyers can claim a refund if following the purchase they’re present in the UK for 183 days or more during a continuous 365-day period within a two-year period beginning 364 days before and ending 365 days after the transaction date.
Does the SDLT surcharge apply if a non-UK resident purchases with a UK resident?
Yes. If any purchasing party is a non-UK resident the surcharge applies to the full consideration/purchase amount.