Stamp Duty Non Resident Guide
This stamp duty guide is specifically aimed at non residents and expatriates.
I’m always running into dreamers that expect stamp duty to be abolished one of these days. Unfortunately 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 unfortunately non residents are required to pay more.
You pay more
That’s because 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!
What are the UK stamp duty rates?
So what are these stamp duty rates then?
To complicate things even further stamp duty rates will change twice during 2021, so if you buy in 2021 the rate you pay will depend on when your property transaction goes through. There are three possibilities!
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 from 8 July 2020 to 30 June 2021
| Property or lease premium or transfer value | Standard rate | Non resident rates |
| Up to £500,000 | Zero | 5% |
| The next £425,000 (the portion from £500,001 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% |
UK stamp duty rates from 1 July 2021 to 30 September 2021
| Property or lease premium or transfer value | Standard rate | Non resident rates |
| Up to £250,000 | Zero | 5% |
| 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% |
UK stamp duty rates from 1 October 2021
| 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 stamp duty I need to pay?
Here’s a couple of examples showing how to work out how much stamp duty 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!
Are there any exceptions to the non resident surcharge?
There are some exceptions to the 2% 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 for stamp duty purposes?
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.
When did these rules come into force?
These rules came into force on 1 April 2021
Additional useful information
Purchasing property as a non resident doesn’t have to be difficult (We’ve talked about how you can go about it here.)
Perhaps the hardest thing you end up having to do is sign up to the Non Resident Landlord Scheme (which we’ve talked about here) to avoid your letting agent or tenant deducting tax from your rent.
In reality, it’s not difficult apart from the fact that you have to do your own tax return.
The good news is, the old days of paper form filling, piles of receipts, the postal service and dealing with HMRC over the phone have been replaced with a totally online service i.e. the UK Government’s ‘Making Tax Digital’ initiative.
UK residents can use the HMRC’s online portal for this. Non residents cannot. However, as a non resident you do have some good options available.
These days, there are some great software options available that turn days of messing around with forms into an hour of being led through the process with tips. We like GoSimpleTax which you can try for free here.
Alternatively, if you are busy you can pay a tax accountant to do everything for you. Prices aren’t what they used to be. UK Landlord Tax offers a highly competitive service for non residents, so it makes sense to start with them. (You can contact them with any queries here).
What about stamp duty on shares?
When you buy shares in the UK electronically (i.e. from a brokerage account off the London Stock Exchange) you pay 0.5%.
However, non-electronic share purchases are free of stamp duty up to £1,000. But be warned, you’ll probably be hard pressed to find a broker that lets you make non-electronic share purchases as a non resident. Moreover, if you can, the chances are they’ll charge you for it, so it may not actually save you any money in the end anyway.
In reality in all likelihood you’ll have to pay stamp duty if you buy shares off the LSE.
That said, there are ways to avoid paying it on share purchases. You can buy shares from other markets. In the US and most European markets there is no stamp duty charge. (In Ireland there is a 1% charge!).
As an alternative, stamp duty is not applicable to overseas domiciled ETFs that trade on the London Stock Exchange. If you look at the relevant fact sheets you’ll find all the ETFs from the largest providers are domiciled overseas, usually Ireland, Luxembourg or France. And stamp duty on UK-domiciled ETFs ended in April 2014.
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%. 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.
