Tax update: Hike in SDLT rates for non-UK residents

Published: Tuesday 4 August 2020

Announced as part of Budget 2018, non-UK residents will face higher SDLT rates when purchasing a residential property in the UK from 1 April 2021. Draft legislation on the new rate and how it will operate has now been released.

A 2% surcharge will be levied on current SDLT rates and will be in addition to the 3% surcharge that already applies for purchases of second homes. This will mean a top rate of up to 17% for non-UK purchasers. 

An individual will be treated as non-resident broadly where they have spent less than 183 days in the UK, in the year prior to the date of the property purchase.

With reduced rates of SDLT announced as part of the Chancellor’s mini summer Budget until 31 March 2021, this could result in quite a difference in the SDLT payable. 

For example, a non-resident purchasing a second home in the UK with a value of £300,000 between now and March 2021 would pay SDLT of £9,000, compared to £20,000 if purchased just one month later in April 2021. 

Transitional rules may also apply where contracts have either been exchanged prior to 11 March 2020 or substantially performed prior to 31 March 2021, but do not complete until after 1 April 2021.

The measure is intended to further deter buy-to-let ownership, to enable UK residents to get a foot on the property ladder. Any revenue raised from this measure will go towards tackling rough sleeping.