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Everything you need to know about stamp duty when buying as an expat

Let’s start with the basics, what actually is stamp duty? Stamp duty is a lump-sum tax that anyone purchasing a property over a certain amount must pay. How much that is varies depending on the price and type of property. If, for example, you were to buy a property in England, you would have to pay stamp duty on anything worth over £125,000, and if it’s a second home, or you happen to be an investor, it’s anything over £40,000, amounts which can creep up on you if you’re not prepared.

Following the 2020 UK budget, it was announced that expats and foreign investors would now face a 2% stamp duty surcharge on top of the 3% for those not occupying their properties, or those for whom this is an additional property. This means that there could be stamp duty charges of up to 17% on the highest priced properties.

This all comes into effect from 1st April 2021, meaning that there will almost certainly be a rush on the parts of both expats and foreign nationals in an attempt to complete their purchases before then. This is expected to result in extra demand and force the completion of certain investments.

So with the core stamp duty rates varying from 0 to 12%, the additional charge will apply to all non-UK residents, which includes individuals, companies and trusts, and will end up affecting values like so:

Up to £125,000 – Zero/3%

The next £125,000 (the portion from £125,001 to £250,000) – 2%/5%

The next £675,000 (the portion from £250,001 to £925,000) – 5%/8%

The next £575,000 (the portion from £925,001 to £1.5m) – 10%/13%

The remaining amount (the portion above £1.5m) – 12%/15%

This new charge is expected to affect roughly 70,000 of the annual 1.2 million property transactions by overseas buyers, with the majority of the impact focused on London. Currency exchange rates are also likely to have an effect, and this may impact foreign investors more than this surcharge with similar charges in other countries property markets.

Also as of 1st April, where a non-resident or civil partner of a UK resident individual buys a property with them, the non-resident surcharge doesn’t apply. But it’s a requirement for both individuals to purchase the property. If, however, the non-resident or civil partner makes a purchase on their own, then the surcharge does apply.

Unsurprisingly, this has come under fire from detractors who say that the new rules are too convoluted, especially those pertaining to specifying residence status and transactions involving non-resident and resident spouses.

However, for now, and with the current stamp duty holiday in effect until 31st March, now is a better time than ever before to get involved as an expat purchasing British property, with the current window of opportunity offering savings of up to £25,000 for properties valued at £500,000.