Getting a mortgage as an expat in the UK means you can invest in quality British property, but there’s a catch that many buyers are unaware of. This is the 5% Stamp Duty Land Tax (SDLT) surcharge. Many expats are shocked to learn about this extra expense and are keen to find out why it exists, especially if they are buying a home for their family or looking into an expat buy-to-let mortgage in the UK as part of their investment plan.
Here’s what you need to know if you want to avoid this additional charge and make smarter investment choices.
What Is the 5% SDLT Surcharge?
When you buy another property in England or Northern Ireland which is not your main one, you have to pay a 5% SDLT surcharge. The rules still apply even if your primary residence is thousands of miles away. This can feel like an unfair punishment for expats, especially if all they want to do is create a better future for themselves or help their family back home.
Who Pays the Surcharge on an Expat Mortgage UK Buy to Let?
The rules can be confusing for expats looking to buy a UK property to rent out. You’ll generally have to pay the 5% surcharge if you already own property in the UK or abroad when you’re purchasing a UK buy-to-let property. For example, if you own a home in Dubai and buy a rental property in London, the surcharge will apply to the second purchase. The government focuses on property ownership, not where you live.
Know Your Options to Avoid Your Surcharge
There are legal ways to avoid the 5% SDLT surcharge, but you need to be smart, know what you’re doing, and seek help from an experienced expat mortgage broker UK if you need it. Here are some effective ways to make this happen:
- Your only home: If you’re an expat selling your main home abroad and buying a new one in the UK, you may be able to avoid the surcharge. Timing is crucial, so you should complete the sale of your old property either simultaneously with or within a specific timeframe of your UK purchase.
- Buyers for the first time: If you’ve never owned property in the UK or anywhere else, and your first purchase is a UK expat buy-to-let mortgage or investment property, you usually won’t have to pay the 5% SDLT surcharge.
- Joint ownership with a non-property owner: If you purchase a property with a partner or family member who has never owned property, you might expect this to help you avoid the 5% SDLT surcharge. Unfortunately, the stricter “weakest link” rule usually means the surcharge still applies if any one owner already owns a property.
- Asking for a refund after buying a new main home: You can get a refund for the 5% surcharge if you sell your only main home and buy a new one within three years of the sale. You will have to ask for this as you won’t get the refund automatically.
- Using a limited company: Many expats choose to buy property through a limited company. Although companies are always liable for the 5% SDLT surcharge on residential properties, this structure can make sense for those who own multiple properties or are professional landlords. It can deliver substantial tax planning and risk management benefits.
Important Mistakes and How to Avoid Them
- Do you have a second home in another country? If so, you won’t be able to avoid the surcharge just because you’re based outside of the UK.
- Many people mistakenly assume that a buy-to-let property counts as their “main” home. It’s important to understand that the government’s definition of a main residence is very strict.
- Another mistake to avoid is delaying the sale of your existing property. Missing key deadlines can mean losing your chance to claim arefund, so it’s crucial to time transactions carefully.
- Avoid making false assumptions about joint purchases. If anyone involved in the purchase has another home, the extra charge will almost certainly remain.
Why a UK Expat Mortgage Can Help
An experienced UK expat mortgage broker can help you understand how the 5% SDLT surcharge affects your situation. They can assist with:
- Reviewing all the properties you own worldwide.
- Planning the timing of transactions effectively.
- Structuring the best UK expat mortgage for your needs and circumstances.
- Applying for refunds if you’re entitled to them.
This support can save you up to thousands of pounds, and make sure your investment isn’t compromised by an unexpected tax bill.
Conclusion
To get a UK expat mortgage and minimise or avoid the 5% SDLT surcharge, it’s essential to plan carefully and structure your purchase strategically. Whether you’re buying your next home or investing through a buy-to-let mortgage UK expat setup, working with experienced professionals can make the process much smoother.
Expat Mortgage UK can help you get the information you need in a way that works for you. When you choose us, you’ll receive a personalised service with expert guidance. We’ll ensure all your questions are answered and make the process much easier for you in the long run.
Need Help Avoiding the 5% SDLT Surcharge?
Our highly experienced mortgage specialists know how to help UK expats make purchases in a way that reduces or helps you avoid the 5% SDLT surcharge altogether. Get in touch with us today for personalised advice, tailored to your needs.
