Stamp Duty Land Tax
What expats need to know about uk stamp duty land tax
What is Stamp Duty Land Tax SDLT?
SDLT is a tax that is payable on residential and commercial properties in the UK. It is charged on a sliding scale, with the percentage of tax increasing as the value of the property increases. As a result, the tax rate is based on the portion of the property price that falls within each band rather than the property’s overall value.
How does Stamp Duty Land Tax work?
SDLT is calculated on the property’s purchase price, with the tax rate being determined by the property’s value. For residential properties, the rates are as follows:
- No tax is payable on properties worth up to £125,000
- 2% tax is payable on properties worth between £125,001 and £250,000
- 5% tax is payable on properties worth between £250,001 and £925,000
- 10% tax is payable on properties worth between £925,001 and £1.5 million
- 12% tax is payable on properties worth over £1.5 million
For commercial properties, the rates are slightly different:
- No tax is payable on properties worth up to £150,000
- 2% tax is payable on properties worth between £150,001 and £250,000
- A 5% tax is payable on properties worth over £250,000
The amount of tax payable is calculated by multiplying the tax rate by the portion of the property price that falls within each band. For example, if you purchased a residential property for £500,000, the tax payable would be calculated as follows:
- No tax is payable on the first £125,000
- A 2% tax is payable on the next £125,000 (£2,500)
- 5% tax is payable on the next £125,000 (£6,250)
- 10% tax is payable on the remaining £125,000 (£12,500)
- The total tax payable would be £21,250
It is worth noting that different rates apply to second homes and buy-to-let properties. In these cases, an additional 3% surcharge is payable on top of the standard SDLT rates.
Changes to SDLT
Since Stamp Duty Land Tax was introduced in 2003, the system has undergone several changes. In 2014, the government introduced a new method of SDLT that replaced the previous slab system. The new system is based on a sliding scale, which means that the rate of tax increases as the value of the property increases.
In 2020, the government announced a temporary change to SDLT in response to the COVID-19 pandemic. This change raised the threshold at which SDLT became payable on residential properties from £125,000 to £500,000. The change was intended to stimulate the housing market and encourage people to buy property during a challenging economic period.
Non-UK residents are subject to the same SDLT rules as UK residents when purchasing property in the UK. However, there are a few additional factors that non-UK residents need to consider when it comes to SDLT.2
Firstly, non-UK residents are subject to a 2% surcharge on top of the standard SDLT rates when purchasing residential property in the UK. This surcharge was introduced in 2021 and is intended to help address housing affordability issues in the UK by discouraging non-UK residents from purchasing UK property as an investment or second home.
In addition, non-UK residents may be subject to different rules regarding SDLT exemptions and reliefs. For example, suppose a non-UK resident purchases a property as their primary residence. In that case, they may not be eligible for the Stamp Duty Land Tax first-time buyer relief, as it is only available to UK residents. Similarly, suppose a non-UK resident purchases a property for commercial purposes. In that case, they may need to consider the rules around SDLT for commercial properties, which are different to those for residential properties.
Non-UK residents should also be aware that they may need to provide additional documentation when paying SDLT, such as proof of identity and residency. This is because the UK government has implemented stricter anti-money laundering regulations in recent years to combat financial crime.
Overall, non-UK residents should ensure that they are fully informed about the Stamp Duty Land Tax rules and regulations that apply to them when purchasing property in the UK. In addition, they may wish to seek professional advice from a tax expert or solicitor with experience in dealing with non-UK residents and SDLT.
There are a few ways that you can potentially reduce the amount of Stamp Duty Land Tax (SDLT) that you have to pay when purchasing a property in the UK:
It is important to note that Stamp Duty Land Tax rules can be complex, and seeking professional advice from a tax expert or solicitor is always advisable before completing a property purchase. They can help you navigate the SDLT rules and regulations and advise you on the most effective ways to minimize your SDLT liability.
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