The UK, and in particular London’s prime residential property market, are an attractive investment for overseas buyers. Whilst the market is busy and prices are on the rise, there are several upcoming changes to UK property legislation that overseas buyers should be aware of, which are outlined below.
The Brexit transition period deadline is fast approaching and it is not yet clear whether the UK will be leaving the EU with a deal. Leaving without a trade deal with the EU is likely to have an impact on confidence in the market and only time will tell how favourable the UK will remain to overseas buyers who have sustained a surge in house prices in recent years.
Changes to Stamp Duty Land Tax (SDLT)
The UK government recently announced that from 1 April 2021, overseas buyers will have to pay a 2% surcharge on their SDLT bill when buying property in the UK. This surcharge has been introduced supposedly to pay for more affordable housing for people living in the UK. For overseas investors, the surcharge can be put into context by the following:
- A buyer of a £5 million property who already owns one or more properties in the UK or elsewhere in the world will be liable for £748,750 in SDLT.
- A buyer of a £10 million property will be liable for £1,445,000 in SDLT.
This surcharge will apply to purchases of residential property (freehold or leasehold) situated in England or Northern Ireland, where the purchaser or one of the purchasers is not UK resident. It will apply to the whole purchase price and includes buildings under construction, to be used as a residential home, as well as off-plan purchases.
For buyers looking to purchase a property in the UK post-April 2021, having a British passport could significantly reduce the SDLT bill.
Changes to purchasing through overseas structures or entities
Properties are often purchased through overseas companies for confidentiality or tax reasons. The UK government recently announced that they intend to introduce a register of beneficial owners of overseas companies and other legal entities owning UK property in 2021.
If this register is introduced, all overseas purchasing entities wishing to buy, sell, charge or grant a long lease of a property in the UK will need to be on the new register, which will be managed by Companies House. This register will record details of the beneficial ownership of the company. Overseas trusts are not included, but are due to be subject to similar requirements to register beneficial ownership of the trust on the UK trust register, which will come into force in 2021, under the EU’s Fifth Money Laundering Directive and it will open up the register to public inspection.
Despite the above upcoming changes, London prime residential property still makes for an enticing investment. If you have questions or require further advice on the above, please contact Johnny Drysdale using the below details.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.