What Taxes do Foreigners Pay when Buying or Selling a UK Property?

If you are a non-resident buying a property to rent it out, the UK has clear tax regulations. Additionally, you could be liable to pay tax if you sell property and make a capital gain. 

These are the main taxes you should be aware of when purchasing or selling a property in the UK

Stamp Duty Land Tax (SDLT)

This is a registration tax all buyers need to pay on the purchase of a property. It is set in a tier system with price brackets and increasing tax rates for higher values. The recent increase in the SDLT has impacted all property purchases. Non-residents, businesses and trustees will pay an additional 2% SDLT on residential property purchases from 1 April 2021. You may be exempt if you are in a lettings business or a developer. There is an additional 3% surcharge if you are buying to let the property.

If you purchase a property from a company and the property’s value exceeds £500,000, a 15% SDLT flat rate will be applied. You may be eligible for some exemptions, such as when the purchase is made for renting purpose as part of a rental business or property trading/ development business.

If you purchase shares in a property holding company then SDLT is not payable. However, there are some drawbacks of investing in said company that you should discuss with your tax advisor one of which is ATED (Annual Tax on Enveloped Dwellings).

Capital Gains Tax

This is due at a rate of 28% on any profits realised on the sale of residential property by all sellers. An exemption is possible on the disposal of your only or main residence by gift or sale. Individuals are eligible for this, but companies are not. 

Income Tax

If a property is purchased to rent out, a 20% withholding tax is charged from the landlord’s gross annual rental revenue from the property. To avoid paying this additional tax, the individual must register with HMRC under the Non-Resident Landlord Scheme and receive the gross rental revenue once registered. They would be required to file a self-assessment form each year and pay income tax on the net rental profit at a rate of 20%.

Inheritance Tax

Regardless of your resident status, if you purchase a residential property in the UK, you will be subject to inheritance tax. On your demise, 40% inheritance tax is payable on the value of all UK assets. The debts on the property may reduce the amount subject to inheritance tax. Property transferred between spouses is normally exempt subject to limitations when you pass the property to the surviving spouse, who is a non-UK domiciled individual.

By procuring a mortgage on the property at the time of purchase, you can limit your liability to inheritance tax. You may also seek life insurance to cover any inheritance tax liability associated with the property’s equity.

We always recommend speaking to a tax advisor or tax accountant to understand what way to structure your purchases. We have partners whom we are happy to introduce you to for a conversation.

What a MENA-based investor needs to know about buying property in the UK

Can international investors buy UK property?

Yes! Unlike some countries that impose limitations on international investors buying properties, there are no restrictions for them purchasing UK real estate. You do not have to be a UK resident to buy a property in the UK.

What is the buying process?

The buying process is very efficient. A solicitor will be appointed to represent you through the transaction. They will need a certified copy of your passport, proof of address and your proof of funds, which is usually your bank statements or salary certificate to show the source of your savings. International investors will also able to finance their purchase through a mortgage. It is not necessary to have a UK bank account as rental payments can be made into any account you own in the world.

Do I qualify for a mortgage even though I am an international investor?

Yes, as long as you are eligible. There is a large list of both international and UK lenders who lend to international investors . We are happy to introduce you to our mortgage partners who will work closely with you. 

What are the costs related to the purchase of a property in the UK?

The amounts you need to pay will depend on the value of the property, however generally Stamp Duty is payable on completion of the purchase and is a figure calculated on a tier basis. Conveyancing fees for the lawyer is generally between £1000-5000 for a 1,2 or 3 bed property but again are based on the value of the property.

The solicitor and mortgage broker (in the case of a financed property) would be able to provide the detailed breakdown of the actual purchasing costs.

Please contact us for assistance on purchasing a property in the UK.

The Elizabeth line effect: Property prices along Crossrail have increased by as much as 215 %

With the initial launch of Crossrail just taken place, the property market has seen house prices in postcodes with stations due to benefit from Crossrail (CR) increase by up to 215 % since the project was first announced, carrying a 14 % premium compared to the wider areas. 

Crossrail station postcodes have seen house prices climb by 79 % with the W1 postcode, with Tottenham Court Road and Bond Street Crossrail stations, seeing the largest increase. 

In 2008, the average house price was just £725,603, but this has since climbed by 215 % to approximately £2.3m today, according to research by London lettings and estate agent Benham and Reeves.

The Woolwich CR station in the SE18 postcode has seen the second largest increase in property prices, climbing by 128 % since the project was first announced.

There are, however, around 13 stations where average property values sit below that of the wider area, offering investors and home owners future rapid growth.

Southall London has the largest level of Crossrail affordability, coming in 27% more affordable than the wider area of Ealing. 

Hayes and Brentwood also offer some of the greatest levels of Crossrail affordability when compared to the wider area. 

We expect that property prices in Crossrail areas will continue to rise quickly till the project is fully completed and beyond as these areas will continue to command a healthy premium because of excellent transport links.

The next phase of Crossrail is where the budding house market is primed for a take-off like we saw and is now known as ‘The Elizabeth Line Effect’. These make an ideal area for savvy investors with an eye on future property price appreciation.

Bayswater and Queensway £3bn regeneration next to Hyde Park

Latest News: Queensway, London is undergoing a once in a lifetime £3bn regeneration including a new entrance for Hyde Park 

Queensway Paris Style Cafe

A transformation is taking place in Bayswater/ Queensway bringing it in line and making it arguably more fashionable than its other more coveted Hyde Park neighbours.

Parisian-style street pavilions, widened pavements, significant green landscaping, public realm improvements, a new retail promenades, a series of landmark heritage hotel developments and a new public entrance to Hyde Park are part of the major overhaul.

Located between Hyde Park and Notting Hill, this major upgrade will deliver the future of London’s high streets and be iconised by landmark property developments including The Whiteley, the grand reimagining of London’s first department store, and Park Modern, a premium development with residences overlooking Hyde Park.

Bayswater and Queensway £3bn regeneration next to Hyde Park

A new attraction for the area will be a series of Parisian-style pavilions, which aims to transform side streets from crammed parking spots to new retail and dining experiences.

The regeneration plans mark the biggest investment Queensway has ever seen. According to Knight Frank, Queensway will be repositioned as a “prime address” in line with the local neighbourhoods adjoining Hyde Park.

Why Watford is One of the Best Spots Next to London to Invest in 2022

Watford, the largest town in Hertfordshire, offers an array of independent boutiques, big brand shops and outstanding areen spaces. Surrounding Watford are 77 golf courses and 8 Michelin rated restaurants, making Watford a desirable place to live and work.

Watford has outperformed London, making it the perfect ownership and investment opportunity.

Watford is One of the Best Spots Next to London to Invest in 2022
  • House prices have grown 8.8% in the year to May 2021.
  • Rental growth of 7% in the year to May 2021.
  • Gross rental yields of circa 5%.
  • Strong earnings growth locally set to maintain a robust rental market.

With access to the London Underground and Overground, Watford has great transport links. Just 15 mins by train from London Euston. Watford is perfectly placed to enjoy the best of rural Hertfordshire, as well as the famous sights of London.

Over the next decade, there is more than £1.5 billion going into regeneration projects which will transform the face of Watford. This investment is already attracting large companies including the head offices of T.K. Maxx, Ralph Lauren, PwC and KPMG.

Connected to The City and Beyond

  • 15-minute direct train from London.
  • Located in the heart of the golden triangle, centred between Oxford, Cambridge and London universities.
  • Watford is aiming to be carbon zero by 2030.
  • Average house is 33% less expensive than London.
  • 3,500+ businesses in Watford, employing over 57,000 people.
  • 12.5% population increase in the next 10 years.

What to expect in 2022, A Year of Significant Growth for the UK Property Market

After what was an exceptional year for UK Property which saw prices rise consistently across the country and further exponential growth forecasted over the next 5 years, knowledge on where opportunity lies and where the next growth investment spots are is crucial.

uk residential forecast

If you are considering your next investment or purchasing a property for the first time, One UK Properties would be delighted to help and provide our expert advice and consultancy services to help you right from where to buy to picking the right solicitors and ensuring a hassle free experience.

Get in touch so we may help you start 2022 with a strong property portfolio plan.

Shazia Shafi Esmail
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