Real Estate Investing
Buying Overseas Property in the UK
by Chris Parry (Write for us!)
(Click on the links within the article to get definition of that word)
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. However, after a cursory study you will see that taxes are perhaps the biggest
obstacle you will have to overcome while buying real estate in the UK. Overall, there are five taxes you should make sure
you understand before making a decision about your UK property purchase.
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.
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