Non-residents buying homes in the UK could be hit with 1 per cent increase in stamp duty

10-October-2019

10-October-2019 16:43

in News

by Jennifer Stevenson

Estate agents are advising British expat and foreign buyers to brace themselves for possible increases of 1% on top of the Stamp Duty Land Tax (SDLT) rates for UK residential purchases.

A consultation by the UK government on whether to increase the stamp duty payable by non-UK-residents buying residential property comes to an end next week (6 May 2019).

If the proposed changes are introduced it will mean a total of 3% SDLT on properties in England and North Ireland costing between £125K and £250K, up to 13% on properties sold for more than £1.5M.

Foreign investors undeterred

Ministers have blamed overseas buyers for inflating UK house prices and making it more difficult for would-be buyers in the UK to get on the housing ladder.

The increase will certainly raise much-needed tax revenue, which is earmarked for helping Britain’s homeless.

But it’s questionable whether the two groups of potential purchasers are competing in the same area of the property market. Or whether the added tax will deter serious foreign investors.

Russian and Asian buyers are accustomed to driving a hard bargain on top-end property purchases. And sales of homes in the UK costing north of £10M have been buoyant in the midst of a softening real estate market, where super-prime prices have been suffering from the effects of Brexit uncertainty.

The number of super-prime residential property sales in the UK doubled in 2018, according to HM Revenue & Customs.

UK-property-for-non-resident-purchasers

Harder bargaining on purchase prices to regain property tax

London-based buyers’ agent Henry Pryor describes the added tax for overseas buyers as “childish.” But he believes its impact will be minimal.

“Purchasers that I am dealing with are sanguine,” he says. “Most have seen a significant currency uplift since the referendum. And… if they have to give the chancellor 1 per cent more, they will give the seller 1 per cent less.”

Australian taxes on foreign buyers are higher

The UK is by no means the only country to levy higher property purchase taxes on non residents, in order to correct perceived distortions in residential property pricing.

In Australia, the state of New South Wales doubled stamp duty charges from 4 to 8 per cent for foreign buyers in 2017, and annual land tax surcharges rose from 0.75 per cent to 2 per cent.

Non-resident buyers can only purchase new properties in Australia from 2015, and must also pay substantial pre-purchase application fees.

Definition of a non-UK property buyer

Accountancy consultants are already querying how non-resident individuals will be defined.

The government’s 42-page consultation document has proposed that a buyer will be considered a non-UK resident if they have spent fewer than 183 days (half the year) in the UK in the 12 months prior to their property purchase.

Getting access to specialist UK lenders for non-resident buyers

It’s clear that advice from specialist mortgage brokers will be essential to position buyers in the correct category for their situation, and identify the lenders who can offer the most advantageous terms for their particular circumstances.

Only a comparatively small number of specialist lenders operate in the international property finance market, most of them introducer-only, and their acceptance criteria all vary.