Stamp Duty for non-UK residents: Everything you need to know

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty is the tax that's paid when you purchase a residential property in England or NI.

There are standard rates, which apply to all residential transactions, then there are additional surcharges for particular types of property purchases, for example: second homes, or buying a property from overseas. The amount of tax you pay is calculated as a percentage of the sale price.

In this article we'll look at the Stamp Duty rules for non UK residents: how much it is, what defines a 'non-resident', and how you can reduce the amount you'll need to pay.

Note: There are different rules for non-residents buying homes in Scotland & Wales. These areas have their own types of property tax.

What is a non-UK resident?

'Non UK resident' refers to someone who is not resident in the UK. A non UK resident refers to anyone who spends most of the year living overseas, whether they were born in the UK or not.

When it comes to calculating how much Stamp Duty you'll need to pay, 'non-resident' has a specific definition.

To be classed as a resident you'll have to prove that you stayed in the UK for at least 183 days during the 12 months before the purchase is finalised. You can stay anywhere in the UK for these days - not just England or Northern Ireland.

If you're you're married or in a civil partnership, only one person from the couple is required to stay in the UK for the set 183 days before the purchase for you both to be classed as UK residents.

If you don't spend the minimum 183 days in the UK during this period you'll be treated as a non UK resident; regardless of your nationality, citizenship, or any 'right to reside in the UK' status you may have been granted in another context (eg. a visa).

There are some separate residency rules for non UK resident corporate buyers of residential property. You can check them out in full here.

How do you prove that you meet the UK resident criteria?

If there's some uncertainty about whether you're a UK resident or a non UK resident you may be asked to provide evidence from the last 12 months. This can include things like:

• Credit card & bank statements

Statements will often show patterns of spending depending on where you are. For example: if you're living in London, it's likely that tube transport or local supermarket shops will frequently appear on your statement. Bank and credit card statements will also show if you've purchased flights to another country.

• Work diaries or time sheets

If you travel a lot for work, your company diaries or time sheets can be a good indicator of where you're currently residing. They'll show where you're having meetings, and when you'll next be travelling for work.

• Mobile phone usage

Providing evidence of mobile phone usage is a very easy way to show whether you're a UK resident or not. It'll be clear which countries you've resided in based on the phone networks you've used to make calls, access the internet, or send messages.

• Utility bills

General overheads like utility bills can provide a general picture of how often you stay in a certain place.

• Membership based activities

Using gyms, libraries, and other membership based venues regularly will demonstrate that you are spending time in a certain place, and can be good proof of your residency status.

This information should be able to provide a clear picture of where you were staying during the 12 months leading up to the property purchase. However, the HMRC reserves the right to request additional specific information and evidence should it be required.

Do non UK residents have to pay Stamp Duty?

Yes, if a non UK resident buys a property in either England or Northern Ireland, they'll be required to pay Stamp Duty Land Tax. In most cases, they'll also need to pay the non resident SDLT surcharge.

Note: There are different rules for non residents looking to buy properties in Scotland and Wales. These areas of the UK do not collect Stamp Duty. They have their own property transaction taxes: LTT and LBTT.

How much is Stamp Duty for non UK residents?

On the 1 April 2021 new Stamp Duty rules were introduced for non residents buying residential property in England and Northern Ireland. Those who are classed as non resident have to pay a 2% surcharge on top of the standard stamp duty tax rates.

If this is your first residential property you'll therefore have to pay the following:

• Up to £125,000: 2%
• The portion between £125,001 -£250,000: 4%
• The portion between £250,001 - £925,000: 7%
• The portion between £925,000 - £1,500,000: 12%
• The portion over £1,500,000: 14%

Note: There is temporary relief on Stamp Duty for residential properties under £500,000. These rates will be in place until June, when they will enter a transitionary period, before returning to the normal rates in October 2021. This means you will pay less Stamp Duty than normal if you purchase your home before October 2021. For full details of the Stamp Duty holiday head here. The 2% non resident surcharge will still apply.

The surcharge applies on top of all other residential rates of Stamp Duty. So, if you're purchasing a second home, or buy-to-let property you'll have to pay both the non UK resident surcharge, and the Additional Dwellings surcharge. For these types of transactions you'll have to pay the following amounts in Stamp Duty:

• Up to £250,000: 5%
• The portion between £250,001 - £925,000: 10%
• The portion between £925,000 - £1,500,000: 15%
• The portion over £1,500,000: 17%

The non resident stamp duty land tax surcharge applies whether you're buying a freehold or leasehold, as long as the property is worth over £40,000, and there's over 7 years left on the lease.

If you are planning to stay full time (or over half the year) in the UK once you've bought the property, you may be able to apply for a refund of the extra 2% surcharge.

Can you reduce the amount of Stamp Duty you have to pay?

In most cases you'll have to pay the surcharge if your a non uk resident. However, there are a few instances where you won't need to pay the extra charge.

For example:

• Buying a mixed use property

You don't have to pay the non-resident surcharge if the property you're buying is mixed use, for example a shop with a flat above it.

• Buying purpose built student accommodation

Like with mixed-use properties, purpose-built student accommodation is not subject to the non UK resident stamp duty surcharge. However, if you plan to rent the property out, you're likely to have to pay the relevant 'higher rate' Stamp Duty. You can read more about this here.

• If you're in 'Crown employment'

'Crown employment' refers to anyone working directly for the UK Government or the Royal Family. This could for example: be in the army, as a civil servant, or diplomat. Any days you're working overseas for the 'Crown' are counted towards your residency eligibility.

If you don't fall into these categories, it's likely that you'll have to pay the 2% surcharge on top of the standard Stamp Duty rates. However, you may be able to apply for a refund.

If you can pass the Stamp Duty residence test within 12 months of buying the property, you'll be eligible to claim a refund on the 2% surcharge you paid upfront. You can meet this requirement by staying in the UK for at least 183 days during any 365 day period that falls within period starting 364 days before, and ending 365 days after the official completion of your property purchase.

If you're buying the property with someone else, you'll both have to pass the residence test to apply for a refund. However, the period of time you spend in residency of the UK doesn't have to be the same.

To apply for a refund, you'll need to amend your SDLT return to demonstrate that you now fulfil the residency criteria. If in doubt, ask your conveyancer to handle this for you.