The new non-UK resident SDLT surcharge, applicable from 1 April 2021, was a watershed moment in UK taxation concerning residential property. Implemented by way of amendment to the
Finance Act 2003 through Schedule 9A, the 2% surcharge adds an extra tier of taxation on buyers of residential property in England and Northern Ireland who do not meet strict UK residency requirements. The policy is intended to control the housing market, by reducing foreign
demand and increase domestic housing availability, at the same time as raising targeted
revenue for social goals (homelessness). For foreign investors as well as their attorneys and tax advisors, a working knowledge of these rules is essential to mitigate substantial compliance risks while also locating favorable recovery options.
The non-resident surcharge is not a standalone tax, but an additional 2% percentage point above
existing SDLT rates. The surcharge is imposed on all
“Nonresident transactions,” which means acquiring a relevant interest in a dwelling where at least one acquirer or purchaser is nonresident in respect of the transaction. The surcharge applies solely to residential property, and non-residential or mixed-use transactions will generally be beyond the scope of this particular surcharge, unless Multiple Dwellings Relief (MDR) is being claimed. The surcharge is applied to properties above a financial threshold of £40,000 (freehold). For leasehold dwellings, the surcharge applies if the premium is at least £40,000 or when the annual rent is at least £1,000. It is important to note that this surcharge supplements other surcharges, such as the Higher Rates for Additional Dwellings (HRAD), the latter of which was only recently raised with effect from 31 October 2024 to 5 percentage points above the standard rates (resulting in a 5% start rate).
To manage the 2% non UK resident SDLT surcharge, it is useful to differentiate between its mechanisms and the wider SDLT context. Normal SDLT is a stepping tax which relates to the acquisition price of property. The surcharge represents a flat 2% increase on all bands of the scale.
| Purchase Price Band | Standard Resident Rate (%) | Non-Resident Surcharge Rate (%) |
|---|---|---|
| £0 – £250,000 | 0% | 2% |
| £250,001 – £925,000 | 5% | 7% |
| £925,001 – £1,500,000 | 10% | 12% |
| Over £1,500,000 | 12% | 14% |
Note: These rates can be altered by the status of the purchaser as first time or additional property owner.
Residency vs. Citizenship
One of the key misunderstandings when imposing a surcharge is the mistaking of nationality or citizenship with SDLT residency. A person’s passport or immigration status is mostly irrelevant to this tax. The SDLT residence test is a mechanical counting exercise of days spent in the UK throughout a certain “relevant period”. Additionally, the SDLT residence test does not apply to the UK’s Statutory Residence Test (SRT), which applies for income and capital gains tax.
“183-day rule” is the main test to establish residence for SDLT. A person is a UK resident for the transaction if they have spent at least 183 days in the UK during any 365 day period (starting from 6 April) that falls in the ‘relevant period’ of either:
The relevant period lasts for two years, from 364 days before the date of effectiveness (the closing date) to 365 days after. This results in two pathways to residency:
count towards the 183-day total.
The shares of joint buyers and couples will be protected so that ownership itself does no
get split up to avoid the tax. Under normal joint purchase conditions, the 2% surcharge
would also apply to an entire transaction if any one of the buyers is a non-resident.
But there is a major exception in the “Spouse/Civil Partner Rule”. If the buyers are spouses or civil partners living together at the effective date, and one of them is a UK resident for
SDLT purposes, then the purchase will be regarded as a resident transaction even if the
other spouses are nonresident. This break is based on the couple buying the property together.
Companies are generally non-resident if they are not resident in the UK for Corporation Tax purposes.” However, the legislation has a “Non-UK Control Test” for UK resident close companies. A UK company is non-resident if it is a “close company” and control of the company is held by non-residents.
Residence of trust, depending on the applicable law for that trust:
A husband and wife, upon settling down has bought their luxury apartment in London. The husband was a British national who had unavoidably spent 190 days during the previous year on business in the UK. The wife had only been in the UK for 30 days and was not a UK national. First advice = you will be liable for the 2% surcharge as the wife is a non-resident.
Lanop Business and Tax Advisors stepped in, pointing out that pursuant to the specific provisions for a married couple living together, the residence status of the husband was sufficient for the whole deal. Due to Lanop’s documentation of their marital status and living arrangements, the settlement was reportable as a UK residential purchase (subject to standard rates rather than the surcharge), sidestepping a £50,000 surcharge.
The 2% surcharge is not a substitute for the other taxes; it’s in addition to them. This interplay is of special importance in the context of HRAD. Where a non-resident individual already owns property elsewhere in the world, they are required to pay the standard SDLT rate plus 5% HRAD surcharge and 2% non-resident surcharge.
The overall SDLT liability on a non-resident buying an additional property may be summarized in mathematical terms as:
For a £1,000,000 acquisition by a non-resident who already has another property:
Some of the more common compliance traps are related to the “Substantial Performance” rule. If a contract was substantially performed (e.g., the buyer took possession or paid all but a nominal part of the price) before official completion, the effective date of the transaction and therefore, the period of residence in question was brought forward.
The ‘forward-looking’ residence test enables many purchasers who are non-resident when they purchase to recover the 2% surcharge if they become resident in the UK in the year after their purchase. It’s a standard issue for expatriates who come back to the UK, or outside entrepreneurs immigrating because of work.
If I’m reading this correctly, to be eligible for a refund, the applicant must satisfy the 183-day residency test for any 365 days not more than one year after the effective date. The period in which a claim for refund of SDLT (that had been incorrectly paid) must be made is two years, beginning with the effective date of purchase. It is important to note that this applies for a longer 12 months compared to the usual 12-month amendment period for other SDLT mistakes!
The relief is normally claimed by making a post-submission to the original SDLT return using the HMRC website or by writing a letter. The appellant must furnish the Unique Transaction Reference Number (UTRN) and proof of payment of tax.
HMRC works on a “process now, check later” basis, but very often opens enquiries within nine months of paying your refund. To protect against such inquiries, taxpayers must keep detailed records of:
In October 2024, a software engineer moved from San Francisco to London. In November 2024, they closed a house. They had not been in the UK at all during the last year and paid the 2% surcharge. Lanop Business and Tax Advisors were engaged to administer the claim in the future. In June 2025, the client achieved 183 days of physical presence. Lanop produced a comprehensive day-count spreadsheet and sent off the amendment to HMRC. The £18,000 refund was paid into the customer’s account within 20 business days. Lanop also arranged the evidence file in preparation for the 9-month HMRC review period, meaning our client had peace of mind.
"Lanop Business and Tax Advisors were crucial in my transfer. Their expertise around the 183-day rule meant I didn’t miss out on a big tax refund. Their proactive communication made a convoluted process seem straightforward "
As a corporation, you don’t have to comply with the same residency requirements as an individual. Individuals can get a refund from a post-purchase claim based on residency, but companies, in many instances, cannot. Firm status is “locked in” on the day of completion. If a UK company is non-resident (because control is overseas), the surcharge cannot be reclaimed even if subsequently the directors move to the UK.
For non-related parties (i.e., business partners), if one of the buyers is a non-resident, you will pay this surcharge based on 100% of the purchase price. It could cause tension between partners if one is bearing the financial burden of the other’s residency status. This may be mitigated in part by structuring the acquisition through a company resident in the UK (if that passes the control test). Still, very cautious advice is needed because of anti-avoidance provisions.
The complications surrounding the SDLT surcharge many times cause a great misunderstanding between parties that could lead to penalties or loss of refund chances.
On both the buyer and seller sides, piecing together the surcharge requires systematic data collection and tracking of timelines.
| Phase | Relevant Component | Period | Impact on Surcharge |
|---|---|---|---|
| Backward-Looking | Residency Test | 364 days before completion | If 183 days are met, the surcharge is NOT payable at outset. |
| Completion Date | Effective Date | Date of completion | Surcharge is paid if the 183-day backward test fails. |
| Forward-Looking | Residency Test | 365 days after completion | If 183 days are met, the surcharge can be RECLAIMED |
| Refund Deadline | SDLT Amendment Window | 2 years from completion | Final date to submit an amendment to the SDLT return. |
A lot of international buyers do eventually convert their investment or second home into their primary residence. This change causes the operation of Private Residence Relief (PRR), one of the most effective reliefs in UK tax law, to relieve the property from Capital Gains Tax (CGT)when it is eventually disposed of.
PRR has a time based exemption, according to the percentage of ownership, time it was your “only or main residence”.Importantly, the last nine months of ownership are part-exempt in every case if at some time the property was the main residence.
Lettings Relief was massively restricted April 2020. Now it is only available if the owner also resided in the property at some point during the same time as the tenant (shared occupancy). Accordingly, most absentee landlords receive no extra relief for the time during which the property was let.
A particularly useful rule can provide that a ‘deemed occupation’ (and so PRR) is given if up to three years’ absence for any reason applies, provided the owner occupied the property as their only or main residence both before and after that period.
A client buys a flat in London while working in Dubai. Five years into their leasethey moved to the UK and spent two years living in the flat before selling. Lanop Business and Tax Advisors were only able to reply after the client had moved into the flat as their main home before the sale; they would have been eligible for even more exemption. They could potentially have used something they mentioned called the 3-year absence rule if we could establish that their first occupation was reasonable. Lanop’s structure resulted in a reduction of the taxable capital gain by more than £120,000.
Moving or living in the UK. The UK is a complex property tax environment for anyone who isn’t resident but has owners, investors, or developers with properties held in the UK, and it requires more than mere ‘tick-box’ compliance – it demands employing accurate interpretation of residency rules, careful timing and proactive planning. Lanop Business and Tax Advisors assists clients in every phase of the property cycle by promoting compliance and tax effectiveness in a more complicated environment. On acquisition, Lanop guides on the 2% non-resident SDLT surcharge, Higher Rates for Additional Dwellings and how these interact with other SDLT rules.
This may involve testing residency for SDLT (e.g., under the 183-day test), identifying exemptions (such as, for example, the spouse or civil partner exception) and structuring joint purchases or corporate vehicles so that they are not inadvertently over-exposed to such charges. When a surcharge cannot be avoided, Lanop ensures that the correct information is submitted by reporting issues to prevent further penalties. or disputes. For clients who later become UK residents, Lanop takes care of the entire SDLT surcharge reclaim process.
This is likely also to involve analysis for discount purposes, drafts of HMRC amendments and evidence packs, and dealing with post-refund enquiries. Their method has reduced by far the risk of having claims rejected or being subject to investigation. In addition to SDLT, Lanop offers proactive Capital Gains Tax planning relating to Private Residence Relief and even lettings. Lanop assists clients to minimize CGT on sale by advising on when occupation should commence, regarded as occupied rules and the 3-year absence rule. This is particularly useful for expats, returning UK residents and investors moving a property from rental to main residence.
PRR is a tax concession that removes from tax the gain arising on the disposal of a dwelling-house which has been the owner’s only or main residence.
This relief extends to the proportion of the gain that relates to the period of occupation as well as the last nine months of ownership.
Yes, but letting the entire property generally means no PRR for that period (unless there is a “deemed occupation” rule).
CGT is charged on the proportion of the gain that represents the time during which you rented the property; this is not covered by deemed occupation or the final nine-month rule.
They had to pay tax on the final 18 months regardless of whether they were living there, provided it was their main home at some stage.
Not right away; the final nine months always count, and absences of up to three years can occasionally be taken as residence if certain requirements are met.
Yes, starting to live in the property again as a main residence can “bridge” periods of absence so that they have spent less than three years out of their main residence, and they should be able to claim relief under the three-year absence rule.
It is usually the place where a person spends most of their time, but an owner can “nominate” which property is their main residence by writing to HMRC within two years of buying the second home.
Where an individual has more than one residence, they may nominate, and the deadline is generally two years from when there is a change in the combination of residences. However, if an individual fails to nominate, the ‘main residence’ is determined as a matter of fact based on where they actually reside.
The UK residential property taxation has become a sea of surcharges and complex residency tests. From taking on the 2% non-resident surcharge, to recovering paid-SDLT, to planning CGT through PRR (Private Residence Relief), there is little room for error. Lanop Business and Tax Advisors bring a high level of technical precision together with a global perspective to address these issues. With real-time accounting technology and deep UK / cross-border tax law knowledge, Lanop allows international investors to concentrate on growing their portfolios but remain fully compliant with what HMRC demands.
The team at Lanop Business and Tax Advisors is excellent; they have served as our accountants for more than five years. They have supported us for more than five years. Their knack for simplifying complex legislation (i.e., non-res surcharge, PRR) has been instrumental to our success in investing in the UK. We highly recommend their amazing services to any international buyer who seeks clarity and professionalism. DIRECTOR, UAE PROPERTY INVESTMENT GROUP.
Aurangzaib Chawla is a UK-based tax advisor and Managing Partner at Lanop Business & Tax Advisors.
With nearly two decades of experience, he supports individuals, landlords, and SMEs with proactive tax planning and compliance. Known for simplifying complex tax legislation, Zaib helps clients minimise liabilities while building sustainable, tax-efficient strategies for long-term success.
Aurangzaib Chawla is a UK-based tax advisor and Managing Partner at Lanop Business & Tax Advisors. With nearly two decades of experience, he supports individuals, landlords, and SMEs with proactive tax planning and compliance. Known for simplifying complex tax legislation, Zaib helps clients minimise liabilities while building sustainable, tax-efficient strategies for long-term success.
Let’s talk through your options, no jargon, no pressure.
Monday to Friday 9am – 6pm
To learn more about how we can help you grow your business, contact us today:
Monday to Friday 9am – 6pm
At Lanop, I am providing my services as the Managing Partner and Tax Specialist. My expertise includes helping medium and small-scale businesses in their accountancy and legal requirements, business start-up support, strategic review, payroll system review and implementation, VAT and tax compliance to cloud accounting. I am also an expert in financial reporting, identifying and monitoring risks, strategic business development, client retention, market acquisition and deals closure by carefully planning my sales cycle.
Enter Your Name & Email Address for a Free Consultation
