The Chancellor of the Exchequer, Rishi Sunak, announced in the 2020 Budget on 11 March that non-UK residents buying property will pay an additional 2% Stamp Duty surcharge.
HM Treasury said the measure will affect those purchasing properties only in England and Northern Ireland and will begin on 1 April 2021.
“This will help to control house price inflation and to support UK residents to get onto and move up the housing ladder,” the government said.
It has also been revealed that the money raised from the surcharge will be used to help address homelessness.
“The additional 2% Stamp Duty surcharge for non-UK resident buyers represents the latest in a long series of tax reforms and may have a short-term impact on demand in higher value markets once it is introduced,” said Richard Donnell, Director of Research & Insight at Zoopla.
“For those who are looking at a longer-term hold, the additional upfront purchase cost will diminish in significance over time.
“In the interim, however, there will likely be some increased activity among non-UK residents looking to purchase before the new rules come into force.”
Mary-Anne Bowring, Group Managing Director at residential property consultancy Ringley, said: “The falling pound has made housing more affordable to overseas buyers, while domestic buyers have had to contend with stagnant wage growth and ultra-low interest rates pushing up prices and eating away at their ability to save.
“An increased Stamp Duty for overseas buyers will simply put things back to where they were before the Brexit vote and level the playing field for domestic buyers.”
Tom Bill, Head of London Residential Research at Knight Frank, said: “The introduction of a surcharge for overseas buyers will bring the UK into line with many other global property markets.
“Attempts to ease affordability pressures in the wider housing market should be welcomed, although the new measure will need to be monitored carefully to ensure there are no unintended consequences, including for the forward-funding of new build developments.
“Furthermore, a wider re-think of Stamp Duty rates is still needed to increase housing market liquidity and maximise any stimulus the government plans to provide to the UK economy.”
Sunak also made it clear that housing remains a priority.
The annual budget for the Ministry of Housing, Communities and Local Government has been raised from £8.4 billion this year to £13.1 billion next year, while the Land Registry has been given an additional £392 million to accelerate its ongoing plans to digitise the house sale registration process.
But several ideas promoted during the recent election did not make it into the budget, most notably a plan to abolish Stamp Duty for sales of homes under £500,000 and a plan to lessen the tax burden for first time buyers even further.
Also, the government was expected to reveal more details and timings for its recently-launched First Homes initiative, which will help first-time buyers purchase new-build properties at a 30% discount.
A £1 billion fund has been announced to pay for the removal of unsafe cladding from buildings over 18 metres high.
The problem of who was going to fund this – leaseholders/freeholders or government – had recently begun to ‘trap’ some home owners within these kinds of buildings, because of difficulties selling or obtaining mortgages on them.