What is the SDLT non-resident surcharge?

The 2% non-resident surcharge applies to purchases of UK residential property by non-residents from 1 April 2021. It is in addition to the standard SDLT rates and the 3% additional dwelling surcharge, meaning non-residents can pay up to 17% SDLT on residential property. The SDLT non-resident surcharge is a 2% additional charge on purchases of UK residential property by non-resident individuals and companies. Key features: (1) Rate — 2% on the entire purchase price (not just the portion above a threshold). (2) Application — applies to purchases of UK residential property (not commercial property) by non-residents from 1 April 2021. (3) Stacking — the surcharge is in addition to the standard residential SDLT rates (up to 12%) and the 3% additional dwelling surcharge (for second and additional properties). This means a non-resident buying a second home could pay SDLT at rates up to 17% (12% + 2% + 3%). (4) Residence test — the buyer's residence is determined by their status in the 12 months before the purchase. If they have spent 183+ days in the UK in the preceding 12 months, they are treated as a UK resident for SDLT purposes. (5) Corporate buyers — a company is treated as non-resident if it is not UK-incorporated or does not have its principal place of business in the UK. The surcharge significantly increases the SDLT cost for overseas buyers of UK residential property. Relevant legislation: Finance Act 2021, Schedule 5 (non-resident SDLT surcharge); FA 2003, Schedule 4ZA (residential SDLT rates). Example: A non-resident individual buys a UK residential property for £2 million. The SDLT is calculated at residential rates (up to 12%) plus the 2% non-resident surcharge. Total SDLT: approximately £213,750. If the property is a second home, the 3% additional dwelling surcharge also applies, bringing the total SDLT to approximately £273,750. Common mistake: Forgetting the 2% non-resident surcharge when calculating SDLT for overseas buyers. The surcharge is on top of the standard rates and the 3% additional dwelling surcharge, significantly increasing the SDLT cost.

What is ATED and when does it apply?

ATED (Annual Tax on Enveloped Dwellings) is an annual tax on UK residential property worth more than £500,000 held through a company or other 'enveloped' structure. Charges range from £4,150 to £28,140 per year, depending on the property value. The Annual Tax on Enveloped Dwellings (ATED) is an annual tax on high-value UK residential property held within a corporate structure (or other 'enveloped' structure, such as a partnership with a corporate partner or a collective investment scheme). Key features: (1) Threshold — ATED applies to residential properties worth more than £500,000 (as valued every 5 years). (2) Annual charge — the charge is banded by property value: £500,001-£1 million: £4,150; £1 million-£2 million: £8,450; £2 million-£5 million: £28,080; £5 million-£10 million: £35,440; £10 million-£20 million: £71,340; £20 million+: £28,140. (Note: figures may vary by year.) (3) Reliefs — several reliefs are available, including: property rental businesses (where the property is let on a commercial basis to third parties), property developers, property traders, and certain charitable uses. The reliefs must be actively claimed by filing an ATED relief return. (4) Filing — ATED returns must be filed annually, by 30 April, for each chargeable property. The tax is also due by 30 April. (5) Interaction with other taxes — ATED is separate from SDLT and CGT, but the property may also be subject to those taxes. ATED does not apply to direct ownership (only to 'enveloped' ownership). Relevant legislation: Finance Act 2013, Part 3 (ATED); FA 2015 (ATED changes). Example: An overseas company owns a UK residential property worth £3 million. The annual ATED charge is £28,080 (for properties worth £2-5 million). If the property is let on a commercial basis to a third-party tenant, the company can claim the property rental business relief, eliminating the ATED charge. Common mistake: Not filing an ATED relief return. Even if a relief applies (e.g., property rental business), the company must file an ATED relief return annually to claim the relief. Failing to file can result in penalties.

How does Non-Resident CGT (NRCGT) work?

Since April 2019, non-residents pay UK CGT on gains from disposing of UK property (residential and commercial) and shares in property-rich companies. The rate is 28% (residential) or 24% (commercial). The gain must be reported and paid within 60 days. Non-Resident Capital Gains Tax (NRCGT) was extended in April 2019 to cover all UK property (residential and commercial) and shares in property-rich companies (where 75%+ of the company's value is derived from UK property). Key features: (1) Scope — non-residents are subject to UK CGT on gains from disposing of UK residential property, UK commercial property, and shares in UK property-rich companies. (2) Rates — 28% for residential property and 24% for commercial property and shares. (3) 60-day reporting — non-residents must report the disposal and pay the CGT within 60 days of the completion date, using the Non-Resident CGT return. This is a separate return from the self-assessment return (though it can be reported on the self-assessment return as well). (4) Calculation — the gain is calculated based on the disposal proceeds minus the acquisition cost (rebased to April 2019 for properties held before then, if elected). (5) Double taxation relief — if the non-resident is also subject to tax on the gain in their country of residence, double taxation relief may be available under the relevant treaty. (6) Exemptions — certain disposals are exempt, such as disposals by individuals who have been UK resident for more than 7 of the previous 9 years (they are subject to standard UK CGT instead). Relevant legislation: TCGA 1992, Part 7A (NRCGT); Finance Act 2019 (NRCGT extension to commercial property). Example: A non-resident individual sells a UK residential property for £2 million that they bought for £1 million. The gain is £1 million (or the gain since April 2019 if rebased). The CGT is 28% of the gain. If the gain is £1 million, the CGT is £280,000. The individual must report the disposal and pay the £280,000 within 60 days of completion. Common mistake: Not reporting and paying the NRCGT within 60 days. The 60-day deadline is strict, and late reporting can result in penalties and interest.

Should I hold UK property directly or through a company?

It depends on your circumstances. Direct ownership avoids ATED but is subject to higher-rate income tax on rental income and 28% CGT on disposal. Corporate ownership attracts ATED but offers corporation tax rates (24% on gains) and potential tax planning advantages. The choice between direct and corporate ownership of UK property depends on several factors: (1) Direct ownership — (a) Income tax on rental income at up to 45% (vs 24% corporation tax for companies). (b) CGT on disposal at 28% (residential) or 24% (commercial). (c) No ATED. (d) Can use personal allowances and CGT annual exemption. (e) Simpler administration. (2) Corporate ownership — (a) Corporation tax on rental income at 24%. (b) Corporation tax on gains at 24% (vs 28% for individuals on residential property). (c) ATED applies to residential property worth £500,000+. (d) No personal allowances or CGT annual exemption. (e) More complex administration. (f) Potential for tax planning (e.g., deferring extraction, using group structures). (g) Potential for IHT savings (shares in a company may qualify for BPR). The right choice depends on: the type of property (residential vs commercial), the value (ATED only applies to high-value residential), the investor's tax position, and the long-term plans for the property. Specialist advice is essential. Relevant legislation: Income Tax (Trading and Other Income) Act 2005 (income tax on rental income); Corporation Tax Act 2009 (corporation tax); FA 2013 Part 3 (ATED). Example: An overseas investor buys a £3 million UK residential property. Direct ownership: income tax on rental income at up to 45%, CGT at 28% on disposal, no ATED. Corporate ownership: corporation tax at 24% on rental income and gains, but ATED of £28,080 per year. The choice depends on the rental yield, the expected gain, and the investor's tax position. If the property is let commercially, the company can claim ATED relief (property rental business), making corporate ownership more attractive. Common mistake: Assuming that corporate ownership is always better due to the lower corporation tax rate. The ATED charge can outweigh the tax savings, especially for high-value residential property that is not let commercially.

Do non-residents pay UK income tax on rental income?

Yes. Non-resident landlords are subject to UK income tax on rental income from UK property. The UK tenant or letting agent must deduct 20% withholding tax (the Non-Resident Landlord Scheme), unless HMRC has authorised gross payment. Non-resident landlords (individuals or companies resident outside the UK) are subject to UK income tax (or corporation tax for companies) on rental income from UK property. The Non-Resident Landlord (NRL) Scheme requires UK tenants or letting agents to deduct 20% withholding tax from the rental income before paying it to the non-resident landlord. Key features: (1) Withholding — the UK tenant or letting agent must deduct 20% tax from the rent and pay it to HMRC. (2) Gross payment authorisation — the non-resident landlord can apply to HMRC for authorisation to receive rent gross (without withholding). HMRC grants this if the landlord's UK tax affairs are up to date. (3) Tax return — the non-resident landlord must file a UK tax return (self-assessment for individuals, corporation tax return for companies) to report the rental income and claim any deductible expenses. (4) Tax rates — individuals are taxed at up to 45% on rental income (after expenses), companies at 24% corporation tax. (5) Deductible expenses — expenses wholly and exclusively for the rental business (e.g., management fees, repairs, mortgage interest, subject to restrictions) can be deducted. (6) Double taxation relief — if the landlord is also subject to tax on the rental income in their country of residence, double taxation relief may be available under the relevant treaty. Relevant legislation: ITA 2007, Sections 862-873 (Non-Resident Landlord Scheme); TIOPA 2010 (double taxation relief). Example: A non-resident individual receives £50,000 of UK rental income per year, with £10,000 of deductible expenses. The UK letting agent must deduct 20% withholding tax on the gross rent (£50,000 × 20% = £10,000) and pay £40,000 to the landlord. The landlord files a UK tax return: taxable income = £40,000 (£50,000 - £10,000), tax = up to £18,000 (45%). The landlord can reclaim the excess withholding tax (£10,000 - £18,000 = no reclaim, or if the tax is less than the withholding, the excess is refunded). Common mistake: Not registering for the Non-Resident Landlord Scheme before receiving rental income. UK tenants and letting agents must deduct 20% withholding tax unless HMRC has authorised gross payment. Failing to register can result in unnecessary withholding and cash flow issues.

International Tax › Property

Inbound Property Investment Tax Guide

Overseas investors buying UK property face SDLT, ATED, and NRCGT. Understand the tax implications and structuring options for foreign buyers of UK property.

Book a Consultation +44 (0) 800 211 8657

The UK is a popular destination for overseas property investment, but the tax rules for non-resident investors are complex and have been tightened significantly in recent years. From Stamp Duty Land Tax (SDLT) surcharges to the Annual Tax on Enveloped Dwellings (ATED) and Non-Resident Capital Gains Tax (NRCGT), overseas investors need to understand the full range of taxes that may apply to UK property investments.

SDLT for Overseas Buyers

Overseas buyers of UK residential property face two surcharges: (1) The 2% non-resident surcharge (applies to purchases from 1 April 2021). (2) The 3% additional dwelling surcharge (for second and additional properties). These surcharges are cumulative — a non-resident buying a second home could pay SDLT at rates up to 17% (12% top residential rate + 2% non-resident + 3% additional dwelling). Commercial property is not subject to these surcharges.

ATED (Annual Tax on Enveloped Dwellings)

ATED applies to UK residential property worth more than £500,000 held through a company (or other 'enveloped' structure). The annual charge ranges from £4,150 (for properties worth £500,001-£1 million) to £28,140 (for properties worth £20 million+). Certain reliefs are available (e.g., property rental businesses, property developers), but they must be actively claimed.

NRCGT (Non-Resident Capital Gains Tax)

Since April 2019, non-residents are subject to UK CGT on gains from disposing of UK residential and commercial property (and shares in property-rich companies). The rate is 28% for residential property and 24% for commercial property. Non-residents must report and pay the CGT within 60 days of the disposal, using the Non-Resident CGT return.

Structuring Options

Overseas investors can hold UK property directly or through a corporate structure. Each option has different tax implications: (1) Direct ownership — subject to SDLT, NRCGT, and UK income tax on rental income. (2) Corporate ownership — subject to SDLT, ATED, corporation tax on gains (24%), and UK corporation tax on rental income. (3) Partnership or trust — different rules apply. The right structure depends on the investor's circumstances, the type of property, and the investor's long-term plans. Specialist advice is essential.

Key Points

What You Need to Know

Overseas buyers face a 2% SDLT non-resident surcharge on UK residential property
ATED applies to residential property worth £500,000+ held through a company
Non-residents pay CGT at 28% (residential) or 24% (commercial) on UK property gains
NRCGT must be reported and paid within 60 days of disposal
The choice between direct and corporate ownership has significant tax implications

Expert Answers

International Tax Frequently Asked Questions

Detailed answers with legislation references, practical examples and common pitfalls.

Explore More

All International Tax Topics

Statutory Residence Test (SRT)Non-Dom Reforms April 2025 Overseas Workday Relief (OWR)Split-Year Treatment Double Taxation Treaties Transfer Pricing Permanent Establishment (PE)Controlled Foreign Companies (CFC)Withholding Tax on Cross-Border Payments Inbound Property Investment Outbound Expansion Structuring Cross-Border Employment Taxation Diverted Profits Tax (DPT)Anti-Hybrid & Mismatch Rules Corporate Interest Restriction Exit Charges & Company Migration Cross-Border Trust Taxation

Need Specialist International Tax Advice?

Our tax advisers can help you navigate international tax with clear, practical advice tailored to your circumstances.

Book a Consultation Call +44 (0) 800 211 8657