HM Revenue & Customs (HMRC) has announced new rates of Stamp Duty Land Tax (SDLT) for non-residents from 1 April 2021.

The new rate represents a two per cent surcharge compared to purchases made by UK residents and will apply to both leasehold and freehold properties, as well as rents on the grant of a new lease.

Non-residents only pay tax on their UK income and do not pay UK tax on their foreign income. Residents ordinarily pay UK tax on all their income, whether it’s from the UK or abroad.

The change to the SDLT system aims to make house prices more affordable and make it easier for first-time buyers to enter the property market, while also addressing house price inflation through a reduction in residential property purchased by non-residents.

The increase was first announced in the 2018 Budget, and a further consultation ran from February – May 2019. The measure will take effect on all transactions from 1 April 2021, but where contracts are exchanged before 11 March 2021 but not completed before 1 April 2021, then transitional rules may apply.

In a statement, HMRC said: “Most individuals will be clear as to their residence status for the purposes of SDLT but some individuals with more complex affairs or who have regular periods in and out of the UK may require additional advice and incur additional costs in determining their tax liability.

“Where individuals pay the surcharge but then satisfy the residence conditions in the 12 months following the transaction, they may be entitled to a refund.

“This measure may impact family formation, stability or breakdown by increasing upfront costs for some non-UK residents purchasing a home in England or Northern Ireland. It could affect customer decisions around the type and location of property purchased.”

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