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HMRC reveals new tax rates for buying property for non-UK residents

Her Majesty’s Revenue & Customs has revealed the new rates of tax for non-UK residents seeking to buy property in England and Northern Ireland.

HMRC reveals new tax rates for buying property for non-UK residents
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  • Staff Reporter
  • February 05, 2021
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Purchases of land and buildings in England and Northern Ireland are subject to Stamp Duty Land Tax (SDLT), and is charged on the purchase price of a property and must be paid within 14 days of the purchase to HMRC.

From 1 April 2021:

  • A non-UK resident buying residential property in England or Northern Ireland will have to pay the new rates of SDLT;
  • The new rates will be 2 per cent higher than the rates which apply to UK residents; and
  • The new rates will not apply for those who buy non-residential property e.g. offices and shops.

SDLT residence tests

HMRC said buyers can apply the following SDLT Residence Tests to determine if they’re a non-UK resident. Both nationality and residence status under the UK Statutory Residence Test are not relevant for this purpose.

  • Individual buyers will be non-UK resident if they are not present in the UK for at least 183 days during the 12-months before their purchase;
  • Corporate buyers will be non-UK resident if they are not UK resident for Corporation Tax purposes at the date of buying the residential property. However, special rules will apply for UK resident companies which are under the direct or indirect control of non-UK resident persons;
  • Partners in a business partnership buying a residential property together will be treated as joint buyers; and
  • Trusts will be non-UK resident if any trustee is a non-UK resident under the SDLT residence tests – except if:
    • if the trust is a bare trust; or
    • if any beneficiary is entitled to remain in the property for life or entitled to income arising from the purchased property.

Partners in a business partnership buying a residential property together will be treated as joint buyers and if any partner is non-UK resident the new rates will apply.

Claiming a tax refund/relief from this tax charge

Individual buyers may be able to claim a tax refund if  – after the purchase – they are present in the UK for at least 183 days in the two year period beginning a year before the purchase and ending a year after the purchase, HMRC said.

Also, if they’re a crown employee and/or their spouse or civil partner is one, they’ll be able to claim an up-front relief from this tax charge.

The new SDLT rates remain subject to approval by UK Parliament but they are expected to be as shown in the table below:

Property, lease premium or transfer value


New SDLT rate for Non-UK residents

 

SDLT rate for UK residents

Up to £125,000

2%

 

0%

From £125,001 to £250,000

4%

 

2%

From £250,001 to £925,000

7%

 

5%

From £925,001 to £1.5 million

12%

 

10%

Over £1.5 million

14%

 

12%

Example – SDLT payable by a non-UK resident.

In May 2021, if an individual buys a house in England for £275,000. The SDLT they owe will be calculated as follows:

  • 2% on the first £125,000 =            £2,500
  • 4% on the next £125,000 =           £5,000
  • 7% on the final £25,000 =             £1,750

Total amount of SDLT you pay  =              £9,250

 

Special rates of tax

HMRC also said special rates of tax will apply if:

  • An individual is a first-time buyer - they may be entitled to pay tax at lower rates than those shown in the above table; or
  • An individual owns or plans to own more than one residential property, or they buy their property using a company - they may have to pay tax at higher rates than those shown in the above table.

Details of the current rates of SDLT can be found on GOV.UK, with information about the new rates to be published there soon.

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