Stamp Duty Non Resident Guide

Being non resident has its advantages. Unfortunately, stamp duty isn’t one of them.

I’m always running into dreamers that expect stamp duty to be abolished one of these days. That’s wishful thinking. After all, stamp duty has been going since the dawn of time. Well, not quite that long, but long enough nonetheless.

It was introduced in England way back on 28 June 1694 when William III and Mary II reigned supreme and needed cash to fund the war against France.

So we’ve been paying it for three centuries in the UK. And some places have been paying it even longer. It’s origins date back to Venice in1604.

In short, if you buy UK property or shares the chances are you’ll have to pay stamp duty.

And whilst stamp duty on UK shares seems fair when you live overseas: Everyone pays 0.5% no matter what. Stamp duty on land is a different kettle of fish.

(Just to be clear. That’s individual UK shares. It’s not the case with many types of funds and with foreign shares).

You pay more

As a non resident you pay 2% more stamp duty when buying property than a UK resident.

If a UK resident pays 0% you pay 2%. If a UK resident pays 5% you pay 7% and so on.

However, that assumes you are buying a property to live in, and you don’t already have one or more properties, which for most non residents buying in the UK is going to be unlikely.

Buying ‘additional dwellings’ like buy-to-lets or second homes require all buyers (including UK residents) to come up with an additional 3%.

This means, if you are a non resident purchasing property in the UK you will usually pay 5% above the standard rates. Ouch!

UK stamp duty rates

The tables below show the UK stamp duty rates alongside the effective rates non residents will pay (for buying a buy-to-let/investment property/house they won’t live in).

UK stamp duty rates

Property or lease premium or transfer value	Standard rate	Non resident rates
Up to £125,000	Zero	5%
The next £125,000 (the portion from £125,001 to £250,000)	2%	7%
The next £675,000 (the portion from £250,001 to £925,000)	5%	10%
The next £575,000 (the portion from £925,001 to £1.5 million)	10%	15%
The remaining amount (the portion above £1.5 million)	12%	17%

How can I work out how much I need to pay?

Here’s a couple of examples showing how to work out how much you need to pay.

The first one is based on standard rate stamp duty (i.e. you are a UK resident buying a house to live in). The second one is based on buying a buy-to-let as a non-resident. Be warned there’s quite a difference!

This example assumes you buy a house for £295,000 in October 2021.

A UK resident buying a house to live in would pay £4,750, calculated as follows:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the final £45,000 = £2,250
• Total £4,750

A non resident buying a buy-to-let would pay £19,500 calculated as follows:

• 5% on the first £125,000 = £6,250
• 7% on the next £125,000 = £8,750
• 10% on the final £45,000 = £4,500
• Total: £19,500

So in short, a non resident ends up paying four times as much!

HMRC has a calculator you can use here if you would like to crunch your own numbers.

Are there any exceptions to the non resident surcharge?

There are some exceptions to this surcharge as follows:

A. If you purchase a property with your (cohabiting) spouse or civil partner, and one of you is classed as a UK resident this surcharge does not apply.

B. ‘Crown Employees’ such as members of the armed forces that reside overseas may be exempt from the 2% surcharge.

C. Individual purchasers may be able to claim a refund of the 2% surcharge if they meet residency requirements within a 12-month period after the effective date of transaction.

D.Some types of property purchase will be exempt from the 2% surcharge. These include:

• Reversionary interests subject to a lease with more than 21 years to run
• Acquisitions of leases for less than 21 years
• Residential property that is subject to the circa 5% commercial property rates
• Purpose built student accommodation

When are you classed as UK resident?

Item C in the list above is worth taking note of. If you are planning to go home some time after your property purchase, it may be better to put off your property purchase until you can meet the residency requirements.

You are classed as UK resident for stamp duty purposes when you have spent 183 days in the UK over a consecutive 365-day period which began 12 months prior to the transaction and ended 12 months afterwards.

The bottom line

Stamp duty is a pain for everyone. It’s a bigger pain for non residents. And that’s because we pay a surcharge of 2% on property. In practice, most property transactions involving expats will be subject to a further 3% surcharge for 2nd homes, buy-to-lets etc.

This means expats can expect to pay 5% above the standard rates when buying property in the UK. Ouch!

Non residents and residents alike will usually pay 0.5% stamp duty when purchasing UK shares, although you could avoid this by buying ETFs or shares from foreign markets.