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Jun 09, 2022

A Guide to Stamp Duty for Non-UK Investors

The amount of tax you pay on a property purchased in the United Kingdom (UK), stamp duty land tax (SDLT) is calculated according to the price you pay for said property. For non-UK property investors, an additional 2% surcharge also comes into play. 

Regardless of whether or not you live there, if you’re buying a house, flat or other land and buildings over £125 000 (approximately R2.7 million) in England and Northern Ireland, you’re subject to SDLT. In fact, non-UK residents are charged at the same rates as UK resident buyers are. Standard SDLT rates fall into five tax brackets, starting at from 0% for those below £125 000 and then ranging from 2% for properties between £125 000 and £250 000 to 12% for those over £1.5 million.  

SDLT is payable 14 days from the date of completion of the purchase – or in the case of off-plan properties, upon completion of the building. Failure to pay in time could result in a fine. Fear not though, if you’re working with a solicitor or legal advisor in the country, it’s their job to ensure that this deadline is met. Buyers can also choose to add the stamp duty tax amount to their mortgage loan. This, however, needs to be negotiated upfront.   

But that’s just the beginning.

Surcharges

In addition to the sliding scale of SDLT charged on purchases of property above £125 000, on 1 April 2021, a 2% stamp duty surcharge was introduced for overseas buyers purchasing residential property in England and Northern Ireland. 

What’s more, rates are also higher for the purchase of a second home. Knight Frank, one of the world’s leading independent real estate consultancies further explains that the surcharge is in addition to the existing 3% stamp duty surcharge on purchases of “additional” dwellings such as buy-to-lets and second homes anywhere in the world. 

Regardless of whether or not you buy the property through your company or as an individual, this surcharge is applied across the board although there are minimal exceptions for investment vehicles like real estate investment trusts (REITs). It’s also worth noting that should you buy the property as a joint purchase together with a spouse or civil partner (with whom you live) if just one of you is a UK resident the surcharge will not apply. Yet outside of marriage or civil partnerships, if there is more than one buyer, the surcharge will apply in full even if only one of the buyers is not a resident. 

There are however some surcharge exemptions. These include: 

  • Purpose-built student accommodation 
  • Residential property that is subject to the circa 5% commercial property rates 
  • Property you lease if your lease is for seven years or less, on the date it was granted. 
  • In addition, a limited exception will apply to non-resident individuals who are “Crown employees” – members of the armed forces posted overseas. 

Need to know

Should an individual become a UK-resident within the 12 months after having purchased a property, they will be allowed to request a refund on this surcharge after submitting their land transaction return. In such cases, an individual is considered to be a UK resident when they have spent 183 days in the UK over any consecutive 365-day period which begins 12 months before the transaction and ends 12 months after. The person will have two years from the date of purchase to amend their SDLT return to reclaim the surcharge. 

Should a non-resident sell their property at a profit, they will be subject to the same rate of Capital Gains Tax as a resident will be.  

Stamp Duty is a tax-deductible cost on the resale of your property, reducing your Capital Gains Tax liability. Get in touch with our international property experts for more information.

This article is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining the liability to tax in specific circumstances. No responsibility for loss to any person acting or refraining from acting as a result of any material in this article can be accepted by Carrick Property. Readers should not act on the basis of this publication without seeking professional advice. 

SOURCES: 

https://www.knightfrank.co.uk/overseas-buyer-stamp-duty-calculator

https://www.patrickcannon.net/news/stamp-duty-for-non-uk-residents/  

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