Introduction

Non-UK residents who purchase residential property in England and Northern Ireland incur a 2% Stamp Duty Land Tax (SDLT) surcharge (the “NR Surcharge”).  

The NR Surcharge applies to the whole of the purchase price by adding the additional 2% to each of the existing residential SDLT rates. It also applies to increase the rate of SDLT paid by reference to the rent payable under a lease of residential property of more than 7 years, as well as on any premium.

Scotland and Wales have their own taxes that apply instead of SDLT on acquisition of property. This note does not comment on the tax position on acquisition of land in Scotland or Wales.

Purchases by individuals 

An individual is ‘non-UK resident’ for SDLT purposes if they spend fewer than 183 days in the UK in any continuous period of 365 days beginning 364 days before and ending 365 days after the transaction occurs. Individuals are considered to have spent a day in the UK if they are in the UK at midnight. This test looks at the total amount of days spent anywhere in the UK, not just in England or Northern Ireland.

Individuals who pay the NR surcharge on purchase of a property are able to claim a refund of the surcharge if they spend 183 days or more in the UK in any continuous period of 365 days beginning 12 months before and ending 12 months after the effective date of the transaction. Notably, this means that employees returning from secondment abroad or people taking up employment in the UK might have to pay the NR Surcharge initially (even if they are first-time buyers) but may then be able to reclaim the surcharge once the 183-day test has been satisfied.  

Relief from the NR Surcharge is available for non-UK residents who are Crown employees subject to UK income tax (e.g. members of the armed forces and diplomats and civil servants on overseas postings if they are purchasing residential property in England and Northern Ireland). 

Joint purchasers

Where property is purchased jointly, if any of those purchasers are non-resident, the NR Surcharge will apply to the whole acquisition. There is an exception to this rule in respect of a joint purchase made by a married couple, or by civil partners, in that the NR surcharge does not apply if one of the parties to the transaction is UK resident for SDLT purposes. 

Acquisitions by non-resident persons other than individuals

The NR Surcharge may also apply to acquisitions by non-UK resident persons other than individuals, such as non-UK resident companies, partnerships and trustees. In addition, in some circumstances the NR Surcharge can also apply to UK resident entities where relevant owners, partners or beneficiaries are non-UK resident.

Example

An individual (“Mr A”) intends to acquire a UK residential property to be his main residence. He currently lives and works overseas and has not spent any nights in the UK. He will move to the UK on the day the purchase completes. He expects to spend £1million. He does not currently own any property.

The standard rate of SDLT on purchase of a residential property in England or Northern Ireland for £1million is £41,250. This has been calculated by applying a 0% SDLT rate to the first £250,000 of the purchase price, a 5% rate on the purchase price between £250,001 and £925,000, and a 10% rate on the remaining £75,000 of purchase price. 

Mr A has not spent any nights in the UK, and so is non-resident for SDLT purposes. This means that a 2% surcharge applies to the entire £1million purchase price. This gives a surcharge of £20,000 which will also be payable on purchase of the property. 

Mr A intends to move to the UK once the property purchase completes. He will be able to claim a refund of the £20,000 surcharge if he is in the UK for 183 midnights in the 365 days following the purchase. 

NB: The above is a simple example of the SDLT position on purchase of a property. The SDLT payable may vary depending on the purchaser’s specific fact pattern.