On 1 April 2021, the Government rolled out a new stamp duty land tax (SDLT) surcharge for non-UK residents looking to purchase property in England and Northern Ireland.
The 2% rate on the stamp duty land tax (SDLT) for non-UK residents applies in addition to other SDLT charges.
Depending on your purchase and your relationship to it, your tax bill could then be pushed up, so here’s everything you need to know to avoid getting caught out.
When does the stamp duty surcharge apply?
The surcharge applies to all ‘non-resident transactions’, even if you live in the property you are buying. We’ll touch on what that means soon.
For major interests in freehold properties, the surcharge will kick in for properties valued at £40,000 or more. It will apply for leasehold properties with a lease premium worth £40,000 or more, or a £1,000 or more valuation of the relevant rent.
The surcharge does not apply to commercial properties or any property that is a mixture of commercial and residential, such as a shop with a flat above it.
Meanwhile, the 2% charge is only applicable to ‘non-UK residents’, which doesn’t quite mean what you might think it does.
Who counts as a non-UK resident?
When HMRC is determining whether someone is a UK resident or not for the purposes of the SDLT, regular checks like nationality, citizenship or residence status under the UK Statutory Residence Test are not relevant. Nor is a ‘right to reside in the UK’ status or any UK visa policy.
Instead, what determines whether someone is a non-UK resident depends on their relationship to the purchase and when it was made.
Quite simply, a UK resident is someone who has been living in the country for at least 183 days in the 12 months before the date of transaction. A non-UK resident, then, is someone who fails to meet this requirement.
Because of this, the surcharge not only applies to foreign nationals looking to move to the UK, but also to expats who want to return to England or Northern Ireland and buy property there.
Things are slightly different for married couples and civil partners, and business partners. As long as at least one of the individuals in these relationships is a UK-resident as defined above, then the surcharge does not apply.
Corporate buyers are also classed as non-UK residents if they are not tax resident in the UK for corporation tax purposes.
Although the surcharge only applies to transactions for residential property in England and Northern Ireland, you still count as a UK-resident if you’ve been living in Wales or Scotland for the relevant period.
To prove they are a UK resident, an applicant will have to provide information like work diaries or planners, bank statements, and membership and usage of member clubs, including gyms.
In other words, proof that they are really living some kind of life in the UK.
Refunds and relief
After making the transaction, buyers stand to get a refund on the surcharge, providing that they reside in the UK for at least 183 out of a continuous 365-day period that is within the two year period:
- beginning 364 days before the effective date of the transaction
- ending 365 days after the effective date of the transaction.
To claim the refund, applicants should amend their SDLT return to inform HMRC that their transaction is not liable to the surcharge, which can be done two years after the effective transaction date.
There is relief applicants can claim too, most notably crown employment relief, which is relevant for members of the armed forces, civil servants and diplomats, among others. Under the scheme, a day spent abroad is treated as a day in the UK if the employee is in another country for reasons relating to that employment.
Get in contact with us to talk through your options around SDLT.