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Non-resident property investors – tax increase

How much overseas buyers pay in stamp duty now?

Until 31 March 2021, Stamp Duty Land Tax (SDLT) for non-UK residents is paid at the same rates on purchases of UK residential property as is paid by UK resident buyers. There are however higher rates for corporate buyers, as opposed to individuals.

Does that differ depending on the value of the property and whether they are a first-time buyer?

Rates are dependent on value of the flat or house being purchased. In general, the current rates are as follows:

Up to £500,000:          zero

£500,001 – £925,000:  5%

£925,001 – £1.5m:       10%

Portion over £1.5m:    12%

The zero rate up to £500,000 (called the stamp duty holiday) is a temporary concession until 31 March 2021 (which may be extended; we will have to wait and see)

After the stamp duty holiday was announced, both first-time buyers and people who have already owned a property no longer had to pay SDLT on a main property up to the value of £500,000 where the sale is completed by 31 March 2021. If the property you’re buying costs more than £500,000, you will pay SDLT – even as a first-time buyer – based on the revised bands.

Also, how much is stamp duty likely to go up next April?

From 1 April 2021 when the stamp duty holiday is due to end, the rates will be as follows:

Up to £125,000:          zero

The next £125,000:     2%

The next £675,000:     5%

The next £575,000:     10%

Portion over £1.5m:    12%

However, from 1 April 2021, first time buyers will pay no SDLT up to £300,000 and 5% on the portion between £300,001 and £500,000. If they buy for over £500,000 then they pay the same amount as everyone else.

How likely is it that stamp duty will rise for overseas buyers next April?

The stated purpose of the increase in 2021 is to deter foreign buyers from driving up UK property prices and to provide revenue to combat rough sleeping. However, there are major flaws in this logic. SDLT used to be a relatively easy tax to understand. It is now however  extremely complex and requires expert advice. Fortunately for us at Cripps, we have one of the UK’s leading consultants in this area who is able to guide the unwary through the stamp duty maze.

Will this increase next year have any effect on the demand for prime properties in Central London?

In the second half of 2019, non-resident buyers accounted for 55% of the purchases in Prime Central London.

The 2% surcharge due to come into force in April 2021 will bring forward a number of PCL purchases into 2020, early 2021. The surcharge will inevitably have an effect but there are bigger factors now at play – how the UK looks to investors post Brexit and how long it takes to come through the Covid-19 pandemic.

For more information please contact dominic.filleul@crippspg.co.uk.

By Dominic Filleul
Posted in: Property