Non-UK residents purchasing property in England and Northern Ireland should be aware of the new rates of tax

25 January 2021

Stamp Duty Land Tax (SDLT) is payable on the purchases of land and buildings in England and Northern Ireland and is charged on the basis of the purchase price of a property. It is a requirement to pay the figure across to HMRC within 14 days of the purchase.

HMRC has confirmed that, from 1 April 2021:

  • Where a non-UK resident buys residential property in England or Northern Ireland, they will be required to pay the new rates of SDLT
  • The new rates will be 2% higher than those applicable to UK residents
  • The new rates will not be applicable to those buying non-residential property, for example, offices and shops

SDLT Residence Tests

Where a buyer is a non-UK resident, they can apply the following SDLT Residence Tests. Nationality and residence status under the UK Statutory Residence Test are not relevant for this purpose.

  • Individual buyers will be non-UK resident if they are not present in the UK for a minimum of 183 days in the 12-months prior to their purchase
  • Corporate buyers will be non-UK resident where they are not UK resident for Corporation Tax purposes at the date of purchasing the residential property. However, special rules are applicable for UK resident companies which are under the direct or indirect control of non-UK resident persons
  • Partners in a business partnership buying a residential property together will be treated as joint buyers
  • Trusts will be non-UK resident if any trustee is a non-UK resident under the SDLT residence tests – except where:
  • The trust is a bare trust, or
  • If any beneficiary is entitled to remain in the property for life, or entitled to income arising from the purchased property

Partners in a business partnership buying a residential property together will be treated as joint buyers, and if any partner is non-UK resident, then the new rates will apply.

Claiming a tax refund / relief from this tax charge

Individual buyers may be entitled to a tax refund if, following the purchase, they are present in the UK for at least 183 days in the two-year period beginning a year prior to the purchase and ending a year after the purchase. Additionally, if they’re a crown employee and / or their spouse or civil partner is one, they can claim an up-front relief from this tax charge.

The new SDLT rates are subject to approval by UK Parliament, but it is expected that they will be as displayed in the following table:

Property, lease premium or transfer value


New SDLT rate for Non-UK residents

 

SDLT rate for UK residents

Up to £125,000

2%

 

0%

From £125,001 to £250,000

4%

 

2%

From £250,001 to £925,000

7%

 

5%

From £925,001 to £1.5 million

12%

 

10%

Over £1.5 million

14%

 

12%

Example – SDLT payable by a non-UK resident

In May 2021, if an individual buys a house in England for £275,00, the SDLT they owe will be calculated as below:

  • 2% on the first £125,000 = £2,500
  • 4% on the next £125,000 =              £5,000
  • 7% on the final £25,000 = £1,750

Total amount of SDLT payable  = £9,250

Special rates of tax

Special rates of tax will apply where:

  • An individual is a first-time buyer – they may be entitled to pay at a lower rate of tax than those detailed in the table
  • An individual owns or plans to own more than one residential property, or they buy their property using a company – they may be required to pay tax at higher rates than those detailed in the table

Details of current rates of SDLT can be located on GOV.UK, and information relating to the new rates will be published there shortly.

 


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