Buying Property Overseas? Consider the United Kingdom
If you are considering a purchase of property overseas, then you have likely taken a glance at the United Kingdom (UK). In the past, many foreign investors have had success investing in property in the UK and specifically in London. Whether it be in the context of an investment or a vacation home, UK real estate has done well for those from outside the country. However, if you do choose to invest in UK property, there are some considerations that you should make sure you take into account.
First of all, it is important to note that unlike many other countries, the UK does not have restrictions on real estate ownership for overseas investors.
The first two taxes are what are referred to as indirect taxes. The stamp duty is a tax that is put on the property you buy based on the purchase price. The exact percentages can range anywhere from 1% of the purchase price to 4%. That 4% maximum comes in on properties that cost over half a million pounds.
The other indirect tax is called a council tax. This particular tax comes from the local authorities. The rate of tax that is levied here depends on where in the UK you buy. Additionally, the value and purchase price of the property play into the tax as well.
As you can see, the two indirect taxes alone can be costly. When you assess the value and purchase price of a property in the UK, these definitely have to be taken into account as they will apply to you. However, while looking at direct taxes, you will see that there are some taxes that a non-resident investor can get out of if he/she knows what they are doing.
The first direct tax of which you should be aware of is the income tax. If you buy a property in the UK, and if that property goes up in value enough that you earn money in the UK, you are subject to the income tax if it is seen as an investment income. However, the tax does not apply to an owner occupier. If you live on the property, then you need not be concerned with income tax..
The second is a capital gains tax. Again, if you earn money on the property while selling it, you could be subject to this if you are from the UK. Non-residents, though, are exempt from capital gain tax if the property in question is owned only as an investment.
Finally, there is the inheritance tax. If you are an investor who has assets in the UK, you may be liable for this tax. If you live somewhere outside the UK, though, there are ways to get out of this tax. Consult a real estate advisor or lawyer to find out how, but for most people outside the UK the inheritance tax need not be an issue.
While a UK property can be a good purchase, you must make sure you take into account all the aspects of the investment. Whether it is direct or indirect taxes, there are costs beyond the price of the property. Once you know what those are and how they are levied, you can make a sound decision about your overseas property investment in the United Kingdom.