Buying property in the UK is always seen as a solid investment, and that is no different for non-UK citizens living abroad. Whilst there is nothing to prevent foreign nationals from doing this, there are many additional legal and financial matters to consider before doing so.
I have teamed up with Jonathan Cunningham, Tax Manager at PM+M Accountants, to discuss what you need to know if you are considering investing in UK property from abroad, both before and after the deal is done.
Consider the legal and financial jurisdictions in the country where you intend to purchase the property
In the first instance, you will need a solicitor based in the country where you are purchasing, says Ashlea. Solicitors based in England and Wales can act in either of those countries, however if the investment property is located in Scotland or Northern Ireland you will need to appoint a solicitor practicing in those specific jurisdictions.
From a financial perspective, if you require funding for the purchase of the property, you may also be subject to more stringent requirements from your lender and a bigger deposit. You will also be subject to a higher tax requirement for those purchasing a residential investment property in the UK as a non-UK based resident or company. This will vary based on if you are purchasing as a company or individual and therefore we recommend that you speak to an expert to discuss your options to ensure you are purchasing in the most tax efficient manner.
Remember to check Stamp Duty Land Tax (SDLT) rates
The tax which you pay will be dependent upon which jurisdiction you are purchasing in, with each country having their own tax regime and rates payable. In England and Northern Ireland, this tax is known as stamp duty land tax (SDLT) and the rates vary depending on the type of property, being residential or commercial, and the purchasing entity. Since April 2021, a different SDLT rate has been applied to purchasers of residential properties who are not resident in the UK. The differing rate is 2 percentage points higher than those which apply to UK residents and also applies to certain UK resident companies which are controlled by non-UK residents.
In Wales, the tax is known as land transaction tax and whilst calculated in a similar way to stamp duty in England, has a higher threshold before the tax becomes payable. In Scotland, land and buildings transaction tax is payable and this must be paid within either 14 or 30 days of the date of the transaction, depending on where you purchase the property.
Capital Gains Tax (CGT) implications
Post purchase, there are Capital Gains Tax implications for non-residents selling UK property, with changes to the UK Capital Gains regime in April 2019 extending it to include gains made on the disposal of commercial property by non-UK residents.
Jonathan explains: “Where a commercial property was owned prior to 6 April 2019, the chargeable gain on the property will now be calculated by reference to the increase in value from the “rebasing date” of 6 April 2019, irrespective of when the property was actually purchased.”
“In practical terms, what this means for companies based overseas is that their gains on the sale of the UK commercial property will be taxed at the corporation tax rate of 19% and for non-UK residents the gains will be taxed at rates up to 20%.”
Jonathan also stresses that it is also important to note that any disposal of a property in the UK by a non-UK based individual must be reported to HMRC within 30 days of the completion of the sale, irrespective of if any tax is due and payable. For any companies based outside of the UK, the sale must now be reported in the company’s UK corporation tax return.
Additionally, non-UK residents selling shares in a company which is “property rich” meaning that 75% or more of its gross asset value is derived from UK property, could also be in the scope of capital gains tax or corporation tax (for companies).
Get in touch
The process of buying a property in the UK as a non-UK citizen can be complex and this article alone demonstrates the need to take early and detailed tax and legal advice as part of the process to establish your position and options.
For a more detailed discussion tailored to your circumstances, please contact:
Ashlea Thornton, Farleys Solicitors – Ashlea.Thornton@farleys.com, 0161 835 9513.
Jonathan Cunningham, PM+M – firstname.lastname@example.org or call 01254 604318.