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Stamp Duty Land Tax (SDLT) Changes Proposed for non-UK Residents

fergal_o_cleirighOn the 6 May 2019, a 12 week consultation by the Government on proposed changes to Stamp Duty Land Tax (SDLT) rates for non-UK residents will come to an end.

This is the Government’s latest scheme to assist people to get on the property ladder. Their main focus is on building more homes but, as this takes time, they are looking at solutions that will have a more immediate effect.

The changes were initially proposed by Theresa May back in Autumn 2018, citing evidence that the purchase of property in England and Northern Ireland by non-UK residents was pushing up house prices for UK residents. At that stage the Government mooted introducing an additional surcharge on properties bought by non-UK residents of either 1% or 3%.

What is the current system?

At the moment, the amount of SDLT payable depends not only on the property value but also on the purchaser’s circumstances and the type of property. So for example, first time buyers pay less or no SDLT and second homeowners pay a higher rate of SDLT on the purchase of their second home.

The system is meant to be easy to administer, recognising that people may not necessarily retain the services of a tax advisor when purchasing a residential property so often the purchaser or the conveyancing solicitor is tasked with working out the SDLT payable.

The current rates of SDLT are:

Standard rate (%) Higher rate (%)            
Property value
£0 – £125,000 0 3
£125,000 – £250,000 2 5
£250,000 – £925,000 5 8
£925,000 – £1.5m 10 13
£1.5m+ 12 15

First time buyers pay no SDLT on the first £300,000 of the property price and then 5% on the value between £300,000 and £500,000.

Corporate bodies such as companies and trusts are subject to different rates.

What is the proposed change?

The change proposed by the Government in a consultation paper earlier this year is to increase the SDLT payable by non-UK residents by 1%. So for example, if a non-UK resident bought a second residential dwelling for £1.3million, the SDLT payable will be 14%.

In justifying this change the Government cited research that in 2014 and 2016 13% of London homes were bought by non-UK residents.

The test to apply to decide if a person is not resident in the UK is if the person has spent fewer than 183 days in the UK in 12 months ending on the date the purchase occurs.

In terms of corporates, the test depends on where it was registered, controlling interest and various other considerations.

Will these changes have much of an impact?

These proposed changes bring us in line with other countries such as Australia, Canada, Singapore and Switzerland but many commentators feel 1% is too low to actually make a difference. Others suggest that the introduction in 2016 of the higher rates of SDLT, Brexit and the lack of availability of housing stock will be sufficient deterrent to ownership for non-UK residents and the proposed changes will have little effect.

Watch this space for the result of the consultation period.

Contact one of Bermans property experts to discuss further or for professional advice.

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