How do new UK Stamp Duty changes affect overseas buyers?

Stamp duty is paid when buying property in the UK. The tax rate depends on the price of the property price, if the buyer is a first-time buyer and when the property is purchased. There are also additional surcharges for second homes and buy-to-lets, and a new surcharge is coming into place for international investors.

When purchasing property in England and Northern Ireland, a new 2% stamp duty surcharge is coming into effect for international investors from 1 April 2021. This will be for investors who are not a UK resident.

To be considered a resident, an individual must have spent 183 days in the UK over a 365-day period. This period starts 364 days before the transaction effective date and ends 365 days after that. If an investor were to move to the UK within 12 months following the transaction, they could be entitled to a refund for the additional surcharge on international investors. And with the recent BNO passport changes, some Hong Kong investors may decide to move to the UK.

If the residence test has not been made by the time of completion, the surcharge, and any other stamp duty surcharges, must be paid to HMRC no later than 14 days from the transaction “effective day”, which is usually from the completion date.

Investors can make stamp duty savings

International investors can still benefit from the stamp duty holiday. With the recent extension and tapering period of the tax holiday, international investors who can complete on a property before the final cut-off date could make some stamp duty savings.

While the additional properties and non-UK residents surcharges will still need to be paid, the regular stamp duty rates will be lower than usual. The nil-rate band will be set at £500,000 until 30 June and £250,000 from 1 July until 30 September. From 1 October, the nil-rate band will return to the normal £125,000 threshold.

If investors act quickly, they could make some attractive savings. And as the UK property market has remained strong even throughout the COVID-19 pandemic, the sector continues to have strong long-term prospects for capital growth and increasing demand. Additionally, with low mortgage rates and the fall in the value of the Pound sterling in recent years, UK property continues to be viewed as an appealing form of investment for many international investors.

Stamp duty surcharges for international investors

With the current stamp duty holiday, the stamp duty rates paid will depend on when the property is purchased and the property value. And if applicable, it’s important to budget for the 2% non-UK resident surcharge and the 3% surcharge on purchases of second homes or buy-to-let properties.

There are also a range of stamp duty exemptions and special rates for certain property purchases. It’s recommended to seek out professional tax advice before making any financial decisions on purchasing a property investment.

Check out the UK government’s website to learn more about stamp duty rates and tax guidance.

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