Are you buying or selling a residential property?Has the buyer lived outside the UK for more than half the past year?If ‘yes’, you need to know that a new 2% Stamp Duty Land Tax (SDLT) surcharge comes into force on 1 April.

This article answers some common questions about the new surcharge:

What counts as ‘living outside the UK’?

An individual counts as a UK resident if they were in the UK for at least 183 days during any continuous 365 days within the relevant period.

What counts as the ‘relevant period’?

The relevant period begins 364 days before the effective date of the transaction, and ends 365 days after the effective date of the transaction.
So, if the buyer spent fewer than half their nights in the UK during the past year, the surcharge will apply.

If they become a UK resident within the first year after completion, the buyer can claim back the surcharge.

What if it’s a joint purchase?

If either one of the joint purchasers fails the residency test, the surcharge applies – except for married couples and civil partners. For these, both individuals qualify as UK residents for the purposes of the SDLT surcharge even if one person fails to meet the residency test but the other does.

What if the buyer is a company?

The surcharge could be liable for certain types of UK company, and when a certain proportion of shareholders live overseas under the test.
The surcharge shouldn’t apply to non-residential properties – except when you’re claiming multiple dwellings relief.

What about SDLT?

The surcharge is in addition to SLTD, but there is currently a stamp duty holiday which will be ending soon:

• Now: Zero stamp duty is payable on the first £500,000
• June: Stamp duty will become due on the first £250,000
• September: Stamp duty will become due on the first £125,000

What does it mean for Wales?

Rather than SDLT, Land Transaction Tax (LTT) applies to the purchase of residential property in Wales.

The Welsh government have not yet decided whether they wish to bring in a surcharge for overseas purchasers. If they don’t, it could have an adverse effect on the funding settlement between the UK government in Westminster and the Welsh Assembly.

In Scotland, residential purchases are covered by the Land and Buildings Transaction Tax (LBTT). The Scottish government also need to decide whether they wish to bring in a surcharge for the purchase of residential property by purchasers who live outside the UK, or perhaps even outside Scotland.

This links to our recent article: What the Budget means to you, which includes the latest information about Stamp Duty in England and Northern Ireland and (LTT) in Wales.

For more details, please contact our expert team.