UK Expat Property Owners Under Attack – Again!

UK Budget 2018

At the Conservative Party conference, Theresa May stated the Government’s intention to impose a levy on “Foreign” buyers of UK property. The definition of “foreign” is being non-UK resident for tax purposes which will impact UK expats around the world. This levy is likely to be in the range 1% – 3% and further announcements will be made in due course1.

Over the last few years we have seen successive Budgets pile pressure on “foreign” owners of UK property with a number of measures:

  • 2015 – Non-residents becoming subject to UK CGT on disposal of UK property
  • 2015 – Introduction of requirement to spend 90 days in a tax year in a property to qualify for Principle Private Residence Relief for that tax year
  • 2015 – Reduction in the “Final Ownership Period” from 3 years to 18 months
  • 2015 – Introduction of requirement to file CGT return within 30 days of completion of sale for non-residents
  • 2016 – Additional 3% Stamp Duty for purchase of additional UK residential properties – PROPERTIES OVERSEAS COUNTED
  • 2016 – Restrictions on the relief which can be claimed for mortgage interest on Buy to Let properties
  • 2017 – All UK property to be subject to Inheritance Tax, whether directly owned or owned through a company or trust

Now in the latest Budget two further changes have been proposed:

  • Letting relief is all but abolished (likely from 2020) with a requirement to live in the property being rented out to qualify!
  • As if that was not enough the “Final Ownership Period” is being cut again to 9 months

The UK Government plan to consult on the latest changes although the consultation has not yet been made available.

What does this mean to UK property owners?

Further reductions to reliefs and allowances coupled with higher taxes on purchases and sales have led us to the point where property prices are under pressure and even, in some cases, already falling2.

Overseas demand has been dampened by fiscal measures and even the weakness of the Pound does not seem to be enough to sustain demand from overseas buyers2.

Expectations of interest rate rises could have a negative impact on affordability further dampening demand and prices2.

Where property is owned as a family home which you plan to return to and see out the rest of your life in it, none of the changes really matter, however the outlook for investment properties could be bleak and perhaps now is the time to consider whether retaining these investments is in your best interests.

What should you do?

If you own UK property as an investment you should review it in the same way any other investment would be:

1. What returns are being generated after costs:

  • Gross and,
  • Net of Tax

2. What about liquidity?

  • When will you need the money?
  • Will it be easy to sell quickly and at the right price?

3. What are the alternatives?

Speak to your AAM Financial Planner or email  [email protected] today to find out more.

Source:

1. https://www.bloomberg.com/news/articles/2018-09-30/may-plans-to-hike-u-k-property-tax-for-foreign-home-buyers

2. http://www.theweek.co.uk/london-house-prices

Taxation information sourced from https://www.gov.uk/government/topical-events/budget-2018

Ian Black
Head of Financial Planning & Wealth Solutions
AAM Advisory

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