In a political move designed to address concerns that overseas buyers are pushing house prices beyond the means of UK residents, the Government has introduced new legislation that will add an extra 2% to the tax payable on such purchases. The Government have previously suggested that the funds raised will be used to help alleviate homelessness whilst also directly contributing to UK residents getting onto the property ladder. The new charge will apply from 1 April 2021 and affect residential purchases in England and Northern Ireland. The legislation introduces new rates of Stamp Duty Land Tax (SDLT) for purchasers of residential properties in England and Northern Ireland who are not resident in the United Kingdom. The new rates will be 2% higher than those that apply to equivalent purchases made by UK residents. The surcharge will apply to freehold property and leasehold property (where the remaining term is more than 7 years). The Government confirmed in the recent March 2021 Budget that the introduction of the surcharge will go ahead, despite the temporary “SDLT holiday”. It will also be added to the existing 3% surcharge which applies to purchases of second homes. This means that if, for example, an overseas individual (or certain UK-resident companies controlled by non-residents) buys a second home, they could have to pay SDLT at a top rate of 17%. Acquiring a property within a trust can be a little more complicated and the SDLT position will usually depend on the type of trust. Beneficiaries under life-interest and bare trusts and trustees of other types of trust could also be caught by the surcharge.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of April 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.