THE UK PROPERTY INVESTORS GUIDE TO THE UK

Many UK expats mistakenly assume that once they’ve relocated abroad, their UK tax obligations become a thing of the past, neglecting the crucial fact that the continued ownership of their UK property can still bring about significant tax considerations. It is therefore crucial to be aware of the tax implications that come with such ownership. This article provides an overview of the key things to consider when owning property in the UK as an expat residing in Asia.

by Giles Henman, Senior Partner & Head of Business, Asia, Eight Wealth International, Jasmine Ee, Tax and Technical Consultant, St. James’s Place and Neil Jensen, Specialist Partner Mortgages, Eight Mortgage International

If you are renting out your UK property, you will need to account for income tax on the rental earnings. The tax rate varies based on your total income, including rental income. As a non-resident, you may be eligible to apply for the Non-Resident Landlord Scheme, allowing you to receive rental income without tax being deducted at source.

When you decide to sell your UK property, you may be subject to Capital Gains Tax on any profits made from the sale. You will be entitled to an allowance to offset your overall profits, although this allowance will gradually reduce over time.

There is also Stamp Duty Land Tax to consider if you are thinking of purchasing UK properties. The added downside to buying as a non-UK resident is that there is a 2% non-resident surcharge on top of the usual stamp duty land tax rates that you will have to pay.

UK properties are considered to be UK based assets and therefore there is always an inheritance tax exposure if the property value exceeds your available inheritance tax allowance. At a whopping rate of 40%, you may want to undertake some simple financial planning to help mitigate the possibility of facing a significant inheritance tax charge.

Historically, many property owners turned to limited companies to mitigate the impact of higher taxes on property income and capital gains. However, recent changes in tax regulations have shifted this landscape, and the question as to whether owning properties within a corporate structure remains tax efficient or not is hugely dependent on your circumstances and the number of properties you own. Owning UK properties within a limited company may trigger additional costs in the form of stamp duty land taxes and ATED charges, which is an Annual Tax on Enveloped Dwellings. These costs can significantly impact the overall financial benefits of using a limited company.

Income and capital gains are chargeable to Corporation Tax at the current rate of 25%, with some limited allowances and deductions that are available to the companies.

There is also no escape from inheritance tax as shares held in a limited company will be brought into the inheritance tax net in the same way that the properties would if they were held individually. As the UK tax landscape surrounding UK properties continues to evolve, seeking advice from a financial adviser will ensure that you make well-informed decisions about your financial matters and make sure that your UK property investment continues to serve its purpose in your financial plan.

Key Considerations

1. Do you have a UK Bank account? If you don’t then it will limit your options, as most lenders would not accept an application without one in place. If you have a UK bank account, keep it open, as it’s much easier to close an account from overseas than it is to open one.

2. What deposit do you have to put down? A lender in the UK often applies different rules to borrowers overseas, the main one being that your deposit in most deals to be around a minimum of 25%.

3. If you are speaking directly to a bank, always remember that they can only quote you their own rates and lending criteria. If they can’t assist you, it does not necessarily mean that you can’t get finance elsewhere.

4. When dealing with a mortgage broker, ensure that you are able to contact them at a time that suits your schedule and also that they have experience of dealing with a non-UK resident.

5. Be careful of researching options on the internet. There are numerous factors that can dictate why you could obtain a mortgage and banks often differ with their criteria and rates.

6. When applying for a mortgage, be prepared to provide evidence to the lender of anything that you have stated on the application form.

7. When deciding to structure a buy to let purchase in individual name or company structure, make sure you’ve taken proper advice in order that you can make a more qualified decision that suits your circumstances the best.

8. Tell your mortgage broker everything. They are there to help you and will be entirely non-judgemental. Failure to disclose important information is likely just to waste yours and others time.

About The Company

For more information on property or other financial matters, please reach out directly, we would be happy to help: info@eightwealthinternational.asia. At Eight Wealth International, we believe in the benefits of great financial planning. At one time or another, most of us will need to seek financial advice. As a Principal Partner Practice of St. James’s Place Wealth Management, we have a wide range of expertise and knowledge, developed over many years, to help people – both individually and in business – fulfill their aims and aspirations, as well as offering that all-important ‘peace of mind’ for the future. We offer a seamless service of distinct quality, professionalism and expertise, covering varying aspects of wealth management, all backed by the successful St. James’s Place Wealth Management Group.

The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives. Members of the St. James’s Place Partnership in Singapore represent St. James’s Place (Singapore) Private Limited, which is part of the St. James’s Place Wealth Management Group, and it is regulated by the Monetary Authority of Singapore and is a member of the Investment Management Association of Singapore and Association of Financial Advisers (Singapore). Company Registration No. 200406398R. Capital Markets Services Licence No. CMS100851. St. James’s Place Wealth Management Group Ltd Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number 02627518. The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances. You are advised to seek independent tax advice from suitably qualified professionals before making any decision as to the tax implications of any investment.