Stamp Duty Land Tax

Further complications when buying a house in the UK

From April 1, 2021 a further complication has been added to the Stamp Duty Land Tax (SRLT) payable on the purchase of a residential property (or long lease on a property) in England *. This is a surcharge of 2% on top of the base SDLT and the Additional Residential Property surcharge for any property acquired by a person who is not “resident” in the UK.

This will impact non-UK residents purchasing residential property in England as an investment, or for occasional personal use. It will also impact people buying a house in England on return from a period abroad.

For the purpose of this surcharge the “UK resident” is defined differently from the normal definition of UK Tax resident. For this SDLT surcharge a “UK resident” must have been physically present in the UK for at least 183 days out of the 365 days ending on the date of the completion of the property transaction.

There is also a possibility of claiming a refund of the surcharge if the new owner of the property is physically present in the UK for at least 183 days in the 365 days after the completion of the transaction. If the property is purchased jointly by a couple who are married or in a civil partnership then only one of them need to qualify as UK resident under this definition to avoid the payment, or to recover the amount paid.

The people who are most likely to be hit with this extra charge are people living outside the UK buying a UK property as an investment. They are also most likely to be hit with the 3% second property surcharge, meaning that their margin rate of SDLT will be 7% on a property costing up to £250,000, rising in stages to 17% on amounts paid in excess of £1,500,000.

The other group of people who will be hit with this charge are people buying a house in the UK when returning from a period of working overseas. If they want the house to be available as soon as possible after returning they are unlikely to meet the 183 days physically in the UK in the 365 days before the completion of the sale and will need to pay the additional 2%. They then need to manage their travel so that they have 183 days in the UK in the year after the purchase so that they can claim a refund. 

*Different arrangements apply to properties located in Scotland (Land and Buildings Transaction Tax) or in Wales (Land Transaction Tax)