Do expats pay Stamp Duty?

Stamp Duty, officially referred to as Stamp Duty Land Tax or SDLT (LBTT in Scotland and LTT in Wales), is the tax paid when purchasing property or land in the UK. Therefore, it applies even if you are a British expat. As with some other taxes, there are thresholds in place for when Stamp Duty applies, with less expensive homes and transfers falling outside the net.

For many British expats, owning a UK property has long been a popular choice – either to keep a foothold in the UK, or as a sensible investment. More recently the impact of Brexit on the value of the Pound has made buying a UK property an attractive investment option. The market has also seen other support from the UK government following the Covid pandemic including a Stamp Duty holiday and discounts for first-time buyers.

Stamp Duty and conveyancing for British expats

Stamp Duty values are typically calculated based on the value of the property being purchased. The current rates are available here.

However, if you’re a British expat (or a foreign investor) and purchasing a property in England or Northern Ireland an additional 2% surcharge will be added. There is also a 3% additional charge, which applies if you’re not occupying the property. As a result, Stamp Duty can reach significant amounts on most expensive properties.

Do be aware that this information relates to England and Northern Ireland; Wales and Scotland have their own land tax rules.

Transfer of equity – SDLT implications

If you own a UK property you might choose to transfer it to someone else, rather than sell it. This often happens at a time of marriage or divorce, when the family home may need to be transferred to a single party. The process is known as a Transfer of Equity. Thankfully, equity transfers between spouses mean that the 3% surcharge doesn’t apply. However, the 2% surcharge can still be applied if the spouse taking on the equity is a British expat and therefore non-UK resident. This situation illustrates just how complex Stamp Duty can be for British expats. It’s therefore always useful to take professional advice when buying or transferring a UK property.

Purchasing a property as a British expat – conveyancing

If you’re living overseas it’s generally advisable to use a specialist solicitor to help you with all aspects of the conveyancing process. Your solicitor can work in parallel with your expat financial adviser to help ensure a smooth process and make certain all taxes are paid as required. 

Why might you decide to purchase property in the UK as an expat or foreign national?

There are a number of reasons for buying a UK property if you’re living overseas. The most common of these are:

  • To retain a foothold in the UK – particularly given the rise in property prices
  • To prepare for a return home
  • For investment purposes, including buy to let
  • As a base for holidays or visits home
  • As a home for children, particularly if they are returning to the UK ahead of you for university or to begin a career

If you are planning on buying a UK property ahead of a move back to the UK it’s worth understanding that purchasing one in the year of your return could trigger additional tax charges. Owning a UK property in these circumstances can mean that your UK tax residency kicks in on a date earlier than you intended and before your physical move to the UK. It’s worth considering your return home carefully and our Moving back to the UK checklist might be a useful read.

Consent to let for a British expat

Many British expats choose to own a UK property and then rent it to generate an additional income. If this is the case, and you’ve purchased the property with a residential mortgage, you might need your lender’s consent to let it out. Alternatively, you may need to consider a specific buy-to-let mortgage which enables you to rent the house or flat.

How The Fry Group can help

We can help provide expert advice on all areas of tax if you need information about Stamp Duty, or are planning an investment in UK property. Our recent webinar offered a guide to letting a residential property in the UK, whilst living overseas.

To discuss your plans please contact your nearest office.

Would you like to find out more?

We are here to help with your estate planning requirements. For more information, whatever your circumstances, please contact us today.