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FOREIGNERS TO PAY ADDITIONAL STAMP DUTY SURCHARGE FOR UK PROPERTY

A rush in overseas buyers is expected ahead of the stamp duty surcharge enforcement in April 2021.

The UK government has announced an additional 2% surcharge on all non-resident buyers of property in England and Northern Ireland, prompting a potential scramble from foreign investors before its enforcement on 1 April 2021. 

Chancellor Rishi Sunak announced the new tax yesterday at the UK Budget 2020 announcement. 

In 2016, there was a scramble from overseas buyers when the government imposed a surcharge on second properties. Experts are now bracing for a rush from foreign investors looking to take advantage of savings before the new foreigner surcharge kicks in. 

Currently, foreign investors pay the same stamp duty rates as UK buyers, ranging from 0% for properties below the £125,000 price tag, to 12% for properties valued at more than £1.5 mil. 

The new 2% stamp duty surcharge will be on top of the existing 3% surcharge on purchases of second properties, bringing the highest rate for foreign buyers purchasing the most expensive homes to an eye-watering 17%! 

While lower than the original 3% surcharge planned; in Malaysian currency (and many other currencies), this could still amount to a staggering price of hundreds of thousands of ringgit in total!

Example

PROPERTY PRICE

£1,000,000

£500,000

£250,000

STAMP DUTY 
(WITH 2ND PROPERTY SURCHARGE)


£73,750


£30,000


£10,000

TOTAL STAMP DUTY 
(WITH NEW 2% FOREIGNER SURCHARGE)


£93,750


£40,000


£15,000


Will the surcharge affect property price growth in the UK? 
Based on historical data, it’s quite unlikely. See chart below:

UK-House-Price-Growth-Despite-Stamp-Duty-Hike-csipropresearch
The introduction of stamp duties on foreign house buyers has hardly stymied the growth of house prices in the UK. Investors now have a one-year window to maximise capital growth before the next stamp duty surcharge is imposed come April 2021.

Is NOW the best time to invest in the UK? Absolutely. Now, more than ever, is the best time to invest in the UK. Here’s why: 

  1. Strengthening currency

The Pound is strengthening after taking a nosedive during the EU Referendum. With renewed clarity in terms of the UK’s future with the EU, the Pound will strengthen further. Take advantage of affordable exchange rates now.  

  1. Increased market confidence

The UK economy has remained stable through the past 3 years of uncertainty following the EU Referendum. However, the market and economy are showing a rebound, thanks to more political certainty after the General Election in Dec 2019 and a decision on Brexit, with the UK leaving the EU on 31 Jan 2020. 

  1. Price growth of 14.8%

The UK property market is underpinned by strong demand and low supply. Not even Brexit could dampen the growth of house prices in the UK. With more certainty in the market and economy, house prices are predicted to grow 14.8% by 2024 (JLL).

  1. Global safe haven

The UK continues to remain a global safe haven for investment. It has been named the hottest investment destination in the world by Ernst & Young.  If you missed out on savings from the stamp duty surcharge in 2016, you don’t want to miss another opportunity to save now.

Speak to us to find out more about investment opportunities in the UK, or if you want to be updated on our upcoming UK Property Masterclasses. Contact us for more information at info@csiprop.com, (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia) or simply fill in the form below. Also, read up on the UK Property Outlook 2020 here.

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By VP

Sources:

https://www.homesandproperty.co.uk/property-news/budget-2020-stamp-duty-surcharge-london-property-a137291.html

https://www.mansionglobal.com/articles/tax-levy-for-foreign-buyers-announced-in-coronavirus-focused-u-k-budget-212899

https://www.expressandstar.com/news/uk-news/2020/03/11/housing-market-may-see-spike-in-overseas-buyers-ahead-of-stamp-duty-surcharge/

https://www.financialreporter.co.uk/finance-news/budget-2020-govt-launches-2-stamp-duty-surcharge-for-non-uk-residents.html  

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