Overseas property buyers face 1% stamp duty surcharge

HMRC and the Treasury have issued a 12-week consultation looking at how a 1% increase to stamp duty land tax (SDLT) for non-UK residents, including companies and trusts, purchasing residential property would work, with proceeds of the surcharge going towards measures to tackle rough sleeping

At Budget 2018 the government announced it would consult on the introduction of an SDLT surcharge on non-UK residents purchasing residential properties in England and Northern Ireland. This 1% surcharge will apply to purchases of residential property, including freehold and leasehold purchases, made by non-UK resident individuals and non-natural persons including companies, trusts and partnerships.

This measure is intended to help control house price inflation and help residents getting onto the housing ladder, after it was discovered that purchases of property by non-UK residents was pushing up house prices for UK residents.

The 42-page consultation covers all aspects of the charge, including how non-residents will be defined and how it applies to companies. Further details will be published after the consultation has concluded on how much the charge is expected to raise.

The government is proposing to treat individuals as non-UK resident for the purposes of the surcharge if they spent fewer than 183 days in the UK in the 12 months ending with the date the transaction occurs.

The consultation document says that the government was guided by two principles when deciding how the surcharge would work. This includes:

the surcharge will apply on top of existing SDLT rates and as far as possible rely on rules currently found elsewhere in SDLT and the wider tax system.

in recognition that not all those who interact with SDLT are tax professionals, the surcharge for individuals will use rules which are as simple as possible to understand and apply.

A UK resident will be liable to the surcharge if, at the point it acquires residential property, it is a close company under the direct or indirect control of one or more non-UK resident persons.

The consultation also outlines that the surcharge will apply so that non-UK resident companies purchasing residential property that are subject to a flat rate of SDLT of 15% will be also be subject to an additional 1% on their purchase.

Certain individuals will be exempt from the surcharge. This includes crown employees working abroad ie, military service personnel.

The government will also refund the surcharge when an individual spends 183 days or more in the UK.

The consultation closes for comment on 6 May.

Current SDLT rates

  Standard rates Higher rates First time buyer relief Certain corporate bodies subject to 15% flat rate Rental element of leasehold purchases
Value Rate Value Rate Value Rate Value (NPV) Rate
£0 - £125,000 0% 3% £0 - £300,000 0% £0 - £125,000 3% £0 - £125,000 0%
£125,000 - £250,000 2% 5% £300,000 - £500,000 5% £125,000 - £250,000 5% £125,000 + 1%
£250,000 - £925,000 5% 8%     £250,000 - £500,000 8%    
£925,000 - £1.5m 10% 13%     £500,000 + 15%    
£1.5m + 12% 15%            

Proposed SDLT rates for non-UK residents

  Standard rates Higher rates First time buyer relief Certain corporate bodies subject to 15% flat rate Rental element of leasehold purchases
Value Rate Value Rate Value Rate Value (NPV) Rate
£0 - £125,000 1% 4% £0 - £300,000 1% £0 - £125,000 4% £0 - £125,000 1%
£125,000 - £250,000 3% 6% £300,000 - £500,000 6% £125,000 - £250,000 6% £125,000 + 2%
£250,000 - £925,000 6% 9%     £250,000 - £500,000 9%    
£925,000 - £1.5m 11% 14%     £500,000 + 16%    
£1.5m + 13% 16%            

Stamp Duty Land Tax: non-UK resident surcharge consultation is here.

Report by Amy Austin

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