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International stamp duty changes – what do they mean for the UK property market?

Q1 2021

Strutt & Parker Senior Director Sarah Curtis provides insight into the latest changes in International Stamp Duty and what they might mean for the UK property market.

Sarah Curtis

Senior Director, London New Homes

+44 7825 664 793

What is changing for International Stamp Duty 2021?

From 1 April 2021, new rates of Stamp Duty Land Tax (SDLT) will increase 2% for overseas property buyers in England and Northern Ireland. The latest surcharge comes in addition to the existing 3% SDLT for investors with more than one property, the flat 15% Stamp Duty rate on property over £500,000 as bought by certain corporate bodies and the standard tax duty rate for UK homebuyers.

Who is affected by changes to International Stamp Duty?

Changes in SDLT will affect anyone wanting to buy property in England or Northern Ireland who is either a non-UK resident, or who lives in the UK but does not have UK residency.

The new rates may also apply to some UK residents who spend part of the year living abroad. For the purposes of SDLT, buyers who have not been present in the UK for at least 183 days during the 12 months before purchase are considered non-UK residents and will be charged the increased rate.

Will certain areas of the UK be affected more than others?

While this is speculative at the moment, the increase in SDLT for overseas buyers should only really affect those in areas of the country most heavily influenced by international purchases - prime Central London, for example, along with other key investment pockets such as Birmingham and Manchester.

Will house prices be affected?

At Strutt & Parker, we are not anticipating any major changes to UK housing prices as a result of this change to SDLT.

Ordinarily, we might expect to see a brief surge in transaction levels in the months prior to an increase; followed by a slowdown and slight cooling in prices in the two to three months after.

This year is slightly unique. With travel corridors still closed and many international exchanges being put on the backburner, it’s difficult to say just how immediately we might see the effects of this change on international purchases, if indeed there are any. From speaking to our international partners, we believe that while people may take the additional tax into account when it comes to negotiating for a sale, the new SDLT will not have any significant wholesale impact on house prices in the UK.

Will increases in international tax put off overseas investors?

Over the last seven years, England has seen three different hikes in stamp duty tax: there was the initial increase in December 2014, followed by subsequent changes in April 2016 for buyers of additional properties (those buying second homes or property investors) and then this one. If you did a comparison between the cost of a £2 million home in September 2014 and April 2021 for a non-UK resident buying a second property, there would be a substantial increase, 42% in fact.

This latest hike is, for some, undoubtedly going to give pause for thought. However, it is key to remember that even with these hikes, the UK is still fundamentally very attractive compared to other countries. Even looking at property in London, this latest increase does not move the dial massively in terms of making the capital more expensive comparatively to other major global cities for buying and holding property. Those with long term desires to spend time in the UK for business, education or leisure will ultimately not be deterred.

We always advise seeking specialist tax advice to understand one’s exact fee requirements.

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