Ready to move to the UK but unsure what your tax liabilities could be once you arrive?
It’s a highly complex area of legislation that requires a firm hand on the tiller to guide you through.
However, with the right adviser and some forward planning, there’s no reason you couldn’t purchase UK property as an investment or to live in.
There are, after all, very few restrictions on who can buy a house, regardless of your citizenship.
Here are some of the taxes you could end up paying if you decide to buy in the UK.
Stamp Duty Land Tax (SDLT)
Stamp Duty Land Tax (SDLT) is a tax imposed on property purchases in the UK.
Rates vary based on the residential property’s value and your situation.
- No SDLT up to £250,000
- 5 per cent on the portion between £250,001 and £925,000
- 10 per cent on £925,001 to £1.5 million
- 12 per cent on amounts over £1.5 million.
First-time buyers may get reduced rates or exemptions for properties up to set thresholds.
Additional properties incur a three per cent SDLT surcharge, and non-UK residents may face an extra two per cent surcharge.
SDLT is due upon completing the property purchase, usually through your solicitor, within 14 days.
SDLT rules can change, so consult a professional or use an online calculator for accurate, current information tailored to your situation.
Income Tax on rental earnings
This is particularly important if you plan to rent out your property once purchased.
If your UK property is an income-generating asset, you could incur Income Tax obligations.
Rates range between 20 per cent and 45 per cent, depending on your total UK income.
Fortunately, the Non-Resident Landlord scheme allows you to receive rental income without tax deductions at source, although declaring this income remains a necessity.
You should discuss the availability and impact of this scheme with your adviser.
Capital Gains Tax
If you are thinking of selling your UK property, it could attract Capital Gains Tax (CGT).
The rate depends on whether you are a basic or higher-rate taxpayer (based on your income), and it’s crucial to report and pay tax on any gains within 60 days of the sale.
You will be subject to a 10 per cent (18 per cent for residential property) tax rate on your total capital gain if your annual income falls below £50,270.
If your annual income exceeds the £50,270 threshold, the tax rate for your entire capital gain will be 20 per cent (28 per cent for residential property).
CGT is a complex area, especially for international investors, and merits detailed discussion with your adviser to ensure accurate tax calculations.
Inheritance Tax
Inheritance Tax (IHT) is another critical consideration if you’re planning on making a property purchase in the UK.
Property forms part of an estate for IHT purposes, attracting a 40 per cent tax above the £325,000 threshold.
This applies irrespective of the owner’s residence or domicile status, making it a vital aspect for international investors to consider, particularly in estate planning.
If the property is your primary residence, you could receive extra allowances from the Nil-Rate Band which offers an extra £175,000 towards your threshold.
Again, this is a highly complex area that we would be happy to go over in more detail with you.
Annual Tax on Enveloped Dwellings
Corporate entities (companies) owning residential properties worth over £500,000 in the UK must pay the Annual Tax on Enveloped Dwellings (ATED).
This tax, which varies based on property value, is an annual charge and an important factor for corporate investors to consider.
Council Tax
Council Tax is a local tax on residential properties in the UK.
Rates are set by local councils and vary based on the property’s assessed value – some can be upwards of £4,000.
While it’s a smaller expense compared to others, it’s a consistent one for property owners to be aware of.
Other non-tax expenses you might encounter
Aside from these tax considerations, there are significant non-tax expenses associated with property investment.
These include legal fees, estate agent fees, property maintenance, and insurance.
While our expertise lies in tax advisory, we can connect you with seasoned professionals who specialise in these areas, ensuring a comprehensive approach to your property investment journey.
