Overseas buyers to face top rate of SDLT up to 17% from 1 April 2021
In the Budget 2020 (which took place on 11 March 2020), Chancellor Rishi Sunak announced a new SDLT (Stamp Duty Land Tax) surcharge of 2% for non-UK residents purchasing residential properties in England and Northern Ireland.
In the past few years, the UK Government has introduced various changes to the standard rates of SDLT including a 3% surcharge when purchasing additional property. In the most recent Budget 2020, a further surcharge of 2% (which may apply on top of the existing 3% surcharge) was introduced and will target overseas buyers starting on 1 April 2021.
The UK Government hopes that this measure will help control house price inflation and to help UK residents get onto and move up the housing ladder. The money raised from the 2% surcharge will be used to tackle rough sleeping and homelessness.
The Budget 2020 took place before the current coronavirus crisis and the lockdown measures implemented not only in the UK but across the world and it remains to be seen what effect this will have on the UK market. Nevertheless, it is anticipated there will be an increased level of activity in the short term as affected overseas buyers look to complete their transactions before the changes come into effect.
The simplified table below shows the current rates of SDLT (based on the purchase of freehold residential property) and how this will apply from 1 April 2021 in respect of overseas buyers buying second homes or buy-to-let investments in the UK.
Standard SDLT Rate
Up to £125,000
Next £125,000 to £250,000
Next £675,000 to £925,000
Next £575,000 to £1.5m
Remaining amount above £1.5m
For example, if you are an overseas buyer looking to purchase a second home in the UK for £2million, the amount of SDLT you pay at current rates is:
3% on the first £125,000 = £3,750
5% on the next £125,000 = £6,250
8% on the next £675,000 = £54,000
13% on the next £575,000 = £74,750
15% on the next £500,00 = £75,000
Total SDLT = £213,750
From 1 April 2021, in the same scenario as above, the amount of SDLT you pay will be:
5% on the first £125,000 = £6,250
7% on the next £125,000 = £8,750
10% on the next £675,000 = £67,500
15% on the next £575,000 = £86,250
17% on the next £500,00 = £85,000
Total SDLT = £253,750
Time is therefore running for overseas buyers, especially in the case of newbuild properties that may not be due to complete before the changes come into effect.
The draft legislation to bring the changes into effect have yet to be published and the information given above is not intended to be legal advice. The SDLT rules are complex and you should seek specialist legal or professional advice before proceeding with any property transaction to understand your SDLT exposure.