Stamp Duty Land Tax (SDLT) is the tax levied when you buy residential property over a certain value in the UK.
When the Covid-19 pandemic caused a halt to the housing market, the UK government introduced a temporary stamp duty holiday, which will be in place until 31 March 2021, to drive activity. This incentive means that first-time buyers won’t pay any stamp duty up to £500,000 and investors with two or more properties will only pay 3% in stamp duty, which is half what they would usually pay. Property Investor Today recently reported that ‘interest in UK property from overseas buyers is surging’ in response to this.
With the stamp duty holiday deadline fast approaching, buyers have been eager to complete on their purchases. There is the additional urgency for overseas investors as from 1 April 2021 they will be subject to a further 2% surcharge, so the time to invest is very much now. Below, we outline everything you need to know ahead of the new charge coming into force.
What is the new surcharge?
Effective from 1 April 2021, the measure introduces new rates of SDLT for non-UK resident buyers of residential property in the UK. The new rates will be 2% higher than those that apply to UK residents and will be enforced on freehold and leasehold properties.
The government first announced this measure in its Budget 2018 and has been consulting on it since, before confirming in the Chancellor’s most recent budget announcement. The policy objective for the surcharge is to ‘help make house prices more affordable, helping people get onto and move up the housing ladder in line with wider objectives on homeownership.’ The revenue generated from this surcharge will support those sleeping rough.
What will happen to the property market after 1 April 2021?
While there is no time like the present to invest in order to make the most of existing stamp duty charges, the UK property market is still an appealing prospect after the surcharge comes into place on 1 April 2021.
A report by Buy Association acknowledged that ‘the fall in sterling, low mortgage rates and the UK’s strong property market will more than make up for this additional tax.’ GRE Assets are very much champions of this and have continued to deliver capital gains and sustained rental demand for our investors. The report continues to recognise ‘the UK property market has remained robust even during political and economic unease’, which we have personally experienced not just through the recent Covid-19 pandemic, but also during the financial crisis in 2007. With this in mind, there should be nothing to stop overseas investors continuing to invest in UK property even in spite of the new SDLT surcharge.
How can GRE Assets help?
GRE Assets offers a full range of investment portfolio services including property management, tax and legal advice, which means they are able to advise investors looking to expanding their portfolio. Our expert team can go through the nuances of changes in tax laws and outline exactly what that means for investment and returns.
To learn more about stamp duty, income tax and capital gains tax, read our recent blog with our Corporate Financial Consultant, Simon Antonis: https://greassets.co.uk/news/stamp-duty-income-tax-and-capital-gains-tax-what-do-they-mean
GRE Assets has been delivering high quality, well connected homes in the UK and Spain since 2006.