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Stamp duty for overseas buyers

New Stamp Duty Land Tax (SDLT) rules announced a 2% additional surcharge for overseas buyers of property in England and Northern Ireland, due to be rolled out from 1 April 2021. 

Up to this date, prevailing stamp duty rules have meant that overseas buyers faced the same rates that UK-resident buyers purchasing a property that isn't replacing their main residence face. This is an additional 3% stamp duty payable on top of the standard rate of SDLT and is known as the second home tax.

The Treasury previously mooted a 1% surcharge but have decided on a 2% rise, meaning that overseas buyers effectively have to pay 5% above the standard rate UK resident purchasers of a main residence face.

What is the new overseas buyer Stamp Duty rate?
Known as the foreign buyers tax, the new rate for overseas buyers is 5% of the purchase price in addition to the standard rate. Here are the 3 rates of stamp duty land tax payable by overseas buyers:

    Standard Rate - variable rates where you pay stamp duty based on the property price above £125,000. For a £500,000 property, the tax is £15,000.

    Second Home (additional rate) - fixed rate of 3% of the purchase price (above £40,000 - you don't pay second home stamp duty for properties under £40,000) - and for purchase prices above £125,000, it's 3% above the varying standard rate. For a £500,000 property, this extra 3% means having to pay an additional £15,000, making the total tax payable become £30,000.

    Stamp duty for overseas buyers - up until 31 March 2021, the rate is the same as the Second Home (additional rate), so for a £500,000 property, the total tax is £30,000.

However as of 1 April 2021, because of the additional 2%, an overseas buyer purchasing a property priced at £500,000 must pay £33,750 versus £15,000 for a UK resident.

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Who is an overseas buyer? The UK Residency test
While the actual terms for the new foreign buyers tax aren't available, the UK residence test is most likely going to be used. If you are already a non-UK resident for tax then it is likely you will also be classed as non-resident for this new overseas buyer's tax.
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Stamp duty for overseas buyers
Frequently Asked Questions

Do foreigners pay stamp duty in the UK?

Overseas buyers pay stamp duty land tax when buying property in England. The stamp duty is payable within 14 days after the completion of the purchase.

Who files the SDLT form to HMRC?

Your conveyancing solicitor will file your stamp duty land tax form and pay any liability within 14 days of the completion of the purchase (not exchange of contracts). You can read more here on What happens after completion. Failing to file your tax return within 14 days will mean a £100 penalty and interest applied to the tax due.

How do you know what the purchase price is?

Stamp Duty Land Tax is payable upon the chargeable interest for the purchase and within a standard sale and purchase conveyance this will be stated within the contract of sale.

What happens if you buy with a UK resident?

While the new Foreign Buyer Stamp Duty tax details are yet to be released, it is expected that the principles from the second home and first time buyer rules will be applied. If anyone has an interest in the property and they are a non-UK resident, then the overseas buyer SDLT rate will be applied.

If the overseas/foreign purchaser becomes a UK resident will they get a refund?

Buyers who become UK residents after their purchase may become eligible for a refund of the surcharge; full details had not become available at the time this article was updated.

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