From 1 April 2021, different rates of Stamp Duty Land Tax (SDLT) will apply to purchasers of residential property in England and Northern Ireland who are not resident in the UK.
The rates are 2 percentage points higher than those that apply to purchases made by UK residents. This surcharge applies to purchases of both freehold and leasehold property, as well as increasing the SDLT payable on rents on the grant of a new lease.
The surcharge also applies to certain UK resident companies that are controlled by non-UK residents.
The surcharge does not apply to purchases of non-residential property or mixed transactions unless Multiple Dwellings Relief is claimed.
Subject to certain conditions being met, relief is available. There are also certain circumstances when the surcharge does not apply.
The surcharge does not apply to purchases of land or buildings in Scotland or Wales. More information about Scottish or Welsh transactions is available.
What property the surcharge applies to
The surcharge applies to all ‘non-resident transactions’, even if you intend to live in the property you’re buying, and regardless of whether or not you already own a residential property.
You must pay the surcharge when you buy a major interest in a freehold residential property for £40,000 or more if one or more buyers is non-UK resident in relation to the transaction.
You must pay the surcharge when you buy a major interest in a leasehold residential property if:
- the lease premium is £40,000 or more, or the relevant rent is £1,000 or more
- one or more buyers is non-UK resident in relation to the transaction
- the major interest being acquired is not a lease with 7 years or less to run
A major interest means freehold or leasehold ownership of the property, and includes an undivided share in a major interest in the property. It will also include share of freehold properties.
The garden and grounds of the property, including any buildings or structures, for example a detached garage, are also included, along with any land that exists for the benefit of the property. However, the surcharge does not apply to a transaction in such a building or land without the purchase of the actual residential property.
In certain circumstances, the surcharge also applies to off-plan purchases.
Who the surcharge applies to
The test used to establish whether a buyer is non-UK resident in relation to the transaction depends on who the buyer is. Nationality, citizenship or residence status under the UK Statutory Residence Test are not relevant for this purpose.
Similarly, ‘right to reside in the UK’ status or any of the UK’s visa policies, including those for British National Overseas passport holders, is not relevant for the purpose of establishing whether a buyer is non-UK resident in relation to the transaction.
The ‘effective date of the transaction’ is the key date used to establish residence status. This is normally the date that the transaction is completed.
SDLT residence tests
Buyers need to apply these SDLT residence tests to establish if they’re a non-UK resident in relation to the transaction.
Buying with someone else
The rules apply to each person, natural and non-natural, who is buying the property. If any of you individually are non-UK resident in relation to the transaction, then all buyers are treated as non-UK resident in relation to the transaction.
Individual buyers are non-UK resident in relation to the transaction if they are not present in the UK for at least 183 days during the 12 months before their purchase.
Although the surcharge only applies to non-resident transactions in England and Northern Ireland, days spent in the whole of the UK count for the purposes of the residence test, not just days spent in England or Northern Ireland. An individual is present in the UK on a particular day if they are situated in the UK at the end of that day.
Brian lives in the USA. He purchases a freehold residential property in England on 1 June 2025 for £800,000. Between 2 June 2024 and 1 June 2025, Brian spent 200 days in the UK. He is therefore UK resident in relation to the transaction.
Individual purchasers may be able to claim a refund of the 2% surcharge if they meet residency requirements within a 12-month period after the effective date of transaction.
If you’re married or in a civil partnership
If you’re buying the property together, then as long as you are not separated and neither of you is acting as a trustee of a settlement, if one of you is UK resident in relation to the transaction then you are both treated as UK resident in relation to the transaction.
Scott and Wendy are married and live together in Australia. They jointly purchase a freehold residential property on 1 June 2025 for £950,000. Neither is acting as a trustee of a settlement.
Between 2 June 2024 and 1 June 2025, Scott spent 183 days in the UK and Wendy spent 100 days.
Scott is UK resident in relation to the transaction. Therefore, Wendy is also treated as UK resident in relation to the transaction, even though she spent less than 183 days in the UK during the 12 months prior to the purchase.
Corporate buyers are non-UK resident if they are not UK resident for Corporation Tax purposes at the effective date of the transaction.
Special rules apply to UK resident companies which are under the direct or indirect control of non-UK resident persons. Such companies are treated as non-resident in relation to the transaction if the company:
is a close company
meets the non-UK control test in relation to the transaction
is not an excluded company
Partners in a business partnership buying a residential property together are treated as joint buyers.
Lacey and Matt are the partners at Sanchez LLP. They are neither married nor civil partners to each other. Sanchez LLP purchases a freehold residential property in England on 1 June 2025 for £600,000.
Between 2 June 2024 and 1 June 2025, Lacey spent 200 days in the UK and Matt spent 150 days.
As Lacey and Matt are buying the property together as partners in a partnership and Matt is non-UK resident in relation to the transaction, Lacey is also treated as non-UK resident in relation to the transaction.
Trusts are treated as non-UK resident if any trustee is a non-UK resident under the SDLT residence tests. This rule does not apply where the trust is either:
a bare trust
one in which any beneficiary is entitled to remain in the property for life or entitled to income arising from the purchased property
In such cases, the residence status of the beneficiaries of the trust is used to establish whether the purchase is subject to the surcharge or not.
This however does not alter who is the chargeable person and who is liable to make a SDLT return and pay any tax due.
Gemma is a trustee of the Schmidt family trust (not a bare trust). Julian is one of the beneficiaries of the trust, and has been accepted to Cambridge University to study law (clever boy!). Gemma uses trust funds to purchase a freehold residential property on 1 August 2023 for £400,000, near the university for Julian to live in during his course.
Under the terms of the settlement neither Julian nor any other beneficiary is entitled to occupy the property for life, or to income earned in respect of the property.
Therefore, Gemma’s residence status is used to establish whether she is non-UK resident in relation to the transaction.
The rates of SDLT which apply to non-resident transactions
Where a transaction is identified as a ‘non-resident transaction’, the 2% surcharge applies on top of all other residential rates of SDLT, including zero rates and the rates which apply to first-time buyers, purchasers of additional dwellings, purchases made by companies and purchases where the consideration exceeds the higher rate threshold.
Erroll purchases a freehold residential property in England on 26 October 2022 for £700,000. He does not already own another property, so the higher rates on additional dwellings do not apply to him. Erroll is a first-time buyer, but as the consideration for the property is above £500,000, First Time Buyers’ Relief does not apply to him.
Between 27 October 2021 and 26 October 2022, Erroll spent 77 days in the UK. He is therefore non-UK resident in relation to the transaction.
His SDLT liability is calculated as follows:
2% up to £125,000 = £2,500
4% of £125,001 to £250,00 = £5,000
7% of £250,001 to £700,000 = £31,500
Fifi’s total SDLT liability is therefore £39,000.
If Erroll spends time in the UK in the 12 months following 26 October 2022, he may be eligible for a refund of the surcharge.
When the surcharge does not apply
The surcharge does not apply to certain purchasers, property and transactions.
The surcharge does not apply to a UK resident close company that is either a:
Property Authorised Investment Fund (PAIF)
body corporate that is a 51% subsidiary of a PAIF
UK Real Estate Investment Trust (REIT)
company that is a member of a group UK REIT
The surcharge does not apply to purchases of property, or part of a property, if the property is either a:
mixture of residential and non-residential, for example, a shop with a flat above it, unless a claim to Multiple Dwellings Relief is made
The surcharge also does not apply to property you lease if your lease is for 7 years or less, on the date it was granted.
The surcharge does not apply to transactions where a contract has either been:
entered into and substantially performed before 1 April 2021
exchanged before 11 March 2020
Reliefs you may qualify for
Crown employment relief
Special rules apply if the buyer is an individual in Crown employment.
Crown employment is considered to be employment under the Crown which is of a public nature, and where earnings are payable out of the public revenue of the UK or Northern Ireland. Examples of such employment include civil servants, members of the armed forces and diplomats.
For the purposes of the residence tests, an individual is treated as present in the UK at the end of a day if, at that time, they are in Crown employment and are present in a country or territory outside the UK for the purposes of that employment. This rule is also individually extended to the spouse or civil partner of a Crown servant, provided they are not separated at the end of that day.
You may qualify for other reliefs that reduce the amount of SDLT you have to pay, for example Multiple Dwellings Relief.
At Alexander JLO you will benefit from decades of experience of dealing with overseas buyers of property in England and Wales. If you are considering buying a property why not give one of our expert property team a call and see what we can do for you?