Law firm Irwin Mitchell has called on all non-UK residents to look into any property tax relief they may be entitled to before April 2021.
In March 2020, chancellor Rishi Sunak said that the government will introduce a 2% surcharge to stamp duty land tax (SDLT) rates for all non-UK residents purchasing a property in England and Northern Island from the next financial year.
This will be applied to all ‘non-resident’ transactions that are completed or occurring from 1 April 2021.
Irwin Mitchell said that multiple dwelling relief is one to look into, but clients would need to check that the property they are buying can be legitimately classified as mixed use.
Rates for mixed and/or commercial use tend to be much lower than surcharges applied to residential properties.
Saving money
Sarah Cardew, tax partner at Irwin Mitchell, said: “A property is considered mixed use if it has both a residential and commercial element – so for example buying a property with fields which are let out for grazing under a formal licence.
“For commercial property, SDLT rates range from 0% to 5%, applied progressively. By way of example, if the purchase of a property for £1.7m ($2.2m, €1.9m) was deemed to be a commercial/mixed use purchase, the SDLT due would be £74,500, which is £128,250 less than the amount that would be due if the property was deemed to be purely residential and subject to both surcharges.”
Cardew believes the use of multiple dwellings relief will also become more prevalent, as it applies where the buyer is purchasing multiple dwellings in one transaction or in linked transactions, and this can substantially reduce the SDLT liability.
Additionally, she warned that the current “SDLT holiday” introduced by the government increases the threshold for the 0% rate of SDLT to £500,000 from £125,000 until 31 March 2021.
As a result, the SDLT due will be even larger for a transaction that completes before 1 April 2021 compared to one that completes on or after 1 April 2021 as there is no nil rate band for non-resident transactions.
For UK purchasers, the SDLT holiday can currently save up to a further £15,000 of SDLT on a transaction.
