95: Stamp duty surcharge for overseas property buyers

Rishi Sunak’s first Budget was somewhat overshadowed by having to deal with the aftermath of recent flooding in the UK and the impact on the economy of the coronavirus.

Rumours had been circulating for some time that capital gains tax entrepreneur’s relief might be axed and that the Chancellor could turn the spotlight onto the important inheritance tax business and agricultural property reliefs.

Entrepreneur’s relief was spared although the lifetime allowance has reduced with immediate effect from a generous £10 million to £1 million, back to the limit when the relief was originally introduced in April 2008. That aside, there was very little mention of tax measures in the Chancellor’s speech and much of this year’s Finance Bill will be the enactment of pre-announced changes.

However, one of the tax measures which did feature was the introduction from 1 April 2021 of the stamp duty surcharge for overseas buyers of property in England and Northern Ireland.

The surcharge was first announced by Theresa May at the 2018 Conservative party conference and in February 2019 HMRC and the Treasury issued a consultation document outlining the proposals.

HMRC have yet to produce a response document. Whilst there might be some tinkering with the proposals in light of comments made in that consultation exercise, the new surcharge is likely to be as set out in that document but we await sight of the legislation.

The one thing we do know for certain is that the surcharge will be at a rate of 2% on top of existing stamp duty land tax (SDLT) rates. A half-way house between the 1% rate originally announced and the 3% rate which was mentioned in the Conservatives 2019 election manifesto.

For higher value properties purchased by a non-UK resident individual owning another property there will therefore be a top rate of 17% on the amount of consideration over £1.5 million.

Tax considerations should generally not be allowed to ‘wag’ the commercial dog but those thinking of purchasing a property might want to do so ahead of the new surcharge if they can. For those selling, whilst SDLT is paid by the purchaser, owners of properties in prime areas (where prospective purchasers may be more likely to come from outside the UK) might consider selling before April 2021 as the prospect of an increased SDLT burden might affect the offers being made.