Research by high-net-worth mortgage broker, Enness Global, found that non-UK resident purchasers could save significant sums by buying a property now compared with buying after April next year. This is because non-UK resident purchasers currently pay the same amount of SDLT as UK purchasers and also benefit from the so called ‘SDLT holiday’.
The nil rate band was temporarily increased back in July 2020 and you can read more about the detail of the SDLT holiday in our article here. The SDLT holiday will cease to apply on 1 April 2021 but the government has come under pressure to extend it.
President of the Law Society of England and Wales, David Greene, has highlighted that, whilst the SDLT holiday has increased transaction volumes “…. this surge in demand, together with operational constraints as a result of COVID-19, means average property transaction times are lengthening. In that context, the way the current relatively short holiday window ends abruptly based on completion dates poses significant risks for consumers as well as businesses in the market”. However, it seems that the Government do not have any plans to extend it - Jesse Norman MP replied to a written parliamentary question on 17 November stating that “the Government does not plan to extend this relief and will continue to monitor the property market.”
The end of the SDLT holiday coincides with date for the introduction of a new 2% surcharge (in addition to the current residential rates) on non-UK resident buyers of residential property. Until now, the purchaser’s place of residence has not been relevant to the level of SDLT payable on a purchase. However, the new surcharge will mean that such purchasers could pay up to 17% in SDLT on the top slice of the purchase price. You can read our comments about this here.
For overseas investors interested in buying UK residential property, the next few months will be crucial. It is not enough to simply exchange contracts ahead of 1 April 2021 because SDLT is charged according to the position as at completion (or earlier substantial performance). However, there are some transitional rules for the 2% surcharge which affect contracts exchanged before 11 March 2020, in which case it may be possible to avoid the 2% surcharge.
Our specialist property and tax lawyers would be pleased to assist on this increasingly complex area of law.
Research by high-net-worth mortgage broker, Enness Global, found foreign buyers could save £23,540 in stamp duty by buying now compared with buying after April next year.