Looking to buy property in the UK – Where are you right now?

As from 1 April 2021, the UK Government have introduced a 2% surcharge on top of the normal rates of Stamp Duty Land Tax (SDLT) for non-UK residents purchasing property in England or Northern Ireland (different rules apply in Scotland and Wales).

The rules for determining UK residence of individuals for SDLT purposes is different from the Statutory Residence Test rules that are applied to determine residency status for other UK taxes for individuals.

Therefore you may find yourself as tax resident in the UK for income tax and capital gains tax purposes, whilst non resident for SDLT purposes.

The rules are relatively straightforward and you will find yourself non-UK resident for SDLT purposes if in the 12 months prior to the purchase you were not present in the UK for more than 183 days.

When purchasing a property jointly, if one person fails the residency test then the additional 2% surcharge applies to entire consideration unless they are spouses or civil partners. For spouses and civil partners, as long as one of them qualifies as UK resident then the additional 2% SDLT surcharge will not apply.

If you live in the UK but work abroad, you may be liable for the surcharge if you do not meet the qualifying conditions to be UK resident for SDLT purposes at the time of the purchase.

For companies, the normal tax rules for determining residence will apply. Therefore need to be careful of where the central management and control is as if this is undertaken outside the UK the additional 2% surcharge will apply.

One note of caution. SDLT is charged on consideration paid for property. When property is gifted by someone therefore, it is unlikely that SDLT will be charged. However, if a property is gifted which is subject to a mortgage that the done takes on, then technically consideration has been paid and SDLT will be charged.

With these new rules bringing SDLT for non residents back into the forefront of minds, it is worth being more vigilant on UK property movements.