UK’s New Stamp Duty Land Tax Surcharge – Summary of proposed draft legislation

The new SDLT surcharge will be in addition to all residential rates of SDLT (including the current three percent ‘additional homes’ surcharge, the flat 15 percent rate for certain corporate purchases and the rates of lease duty) where a non-UK resident (trustee, company or individual) purchases residential property in England and Northern Ireland (in the case of individuals only where they are purchasing additional homes). The surcharge is due to come into force in April 2021.


Surcharge rate?

During the initial consultations in 2019 on the introduction of a new SDLT surcharge, it was proposed that this be set at 1%, however, the draft legislation confirms that this will be 2%. This will have a dramatic effect on the potential top rate of SDLT paid in future by non-UK resident purchasers with a potential top rate of 17%.


Which transactions are caught by the new surcharge?

  • All purchases of a major interest in UK dwellings (other than leases of 21 years or less or leases with a reversionary interest);
  • Where the purchaser, or one of them, is non-UK resident (an exception exists for married couples); and
  • The purchase price is £40,000 or more.

A dwelling includes all private residential properties, a building or part of a building if it is used as a private dwelling or is being constructed or altered for such use.


What constitutes a non-resident?

The surcharge residency test differs to the statutory residence test.

An individual will be non-resident for SDLT purposes if they have spent fewer than 183 days in the UK in the 12 months preceding the property purchase (days of departure are not counted).

Non-residents can claim back the surcharge if they spend 183 days (or more) in the UK in any continuous 365 day period during the specific window commencing 12 months before and ending 12 months after the date of the purchase.

In respect of married couples where one is resident and one is not, the non-resident will be deemed resident for the purposes of the surcharge.

In respect of companies, if they are incorporated and managed outside the UK they will be caught by the surcharge. The surcharge will also apply to UK resident companies that are controlled by non-resident shareholders.


Impact on trustees?

Discretionary trusts:

In respect of a corporate trustee, the above same rules in respect of companies apply and non-resident corporate trustees will pay the surcharge.

In respect of an individual trustee, the same rule in respect of 183 days or less in the UK in the 12 month period prior to purchase will apply.

Where multiple trustees exist, whether corporate or individual, the surcharge remains applicable where one of them is non-resident.

Interest in possession trusts:

The surcharge will apply, regardless of the residency of the trustee, on the purchase of additional property if a beneficiary is entitled to live in, or receive income from, a property where that beneficiary is non-resident as described above.

Bare Trusts:

The surcharge will apply to leases, again regardless of residency of the trustee, if the beneficiaries are non-resident as described above.



Where possible, non-resident purchasers of property may wish to attempt to accelerate purchases ahead of April 2021 to avoid the surcharge and also benefit from the current SDLT exemptions in place as a result of COVID-19.


For any questions on this matter please do not hesitate to contact:

London office – Alasdair Johnston

Isle of Man office – Kevin Loundes

Monaco office – Andrew Tailby-Faulkes


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