3 key financial issues if you’re buying property in the UK

08/03/2021

By David Snelling

If you’re thinking of moving to the UK or looking at buy-to-let options, here are three key financial issues to be aware of if you’re buying property in the UK.

We’re aware that many of our clients are often looking at buying property in the UK. This could be because they are planning to move back after a period abroad or are looking at a buy-to-let (BTL) investment opportunity.

Complete RPI are a property company that we have worked closely with for some time. Established in Hong Kong and the UK for over 20 years they specialise in providing support for people moving from Asia to the UK – either UK expats returning home, or Hong Kong /Asia residents relocating to the UK.

We recently caught up with their Founding Managing Director, Rupert Smith, to talk to him about the property market and, specifically, about any trends he’s started to pick up on recently.

David Snelling – What are the general buying trends in the UK market from Asia at present?

Rupert Smith – We have seen a significant increase in both UK investment enquiries and home ownership in the UK from Asia Pacific over the past 12 months. In our opinion this is being driven by a number of factors, primarily:

  • Instability in alternative investment markets
  • British nationals overseas (BNO) looking at the UK market
  • The current Stamp Duty incentive in the UK.

Most investment enquiries are for one- and two-bedroom apartments in city locations such as Birmingham and Manchester, which offer a good blend of both capital growth and yield.

DS – Are you seeing more transactions for buy-to-let (BTL) or residential properties?

RS – At the present time it’s mainly BTL enquiries and transactions.

DS – Are you seeing a trend for Hong Kong/Asia residents buying a family home in the UK?

RS – The enquiries are truly diverse with no trend in either location or style of property. One factor we are seeing, however, is access to quality education and transport links and the desire for properties with outside space which does suggest some interest in family accommodation.

DS – Does a typical UK family home for Hong Kong or Asian people differ from what a British person may buy? For example, someone recently asked me if Hong Kong nationals like to buy London apartments because that is what they are used to living in!

RS – If anything, for home ownership rather than BTL, most enquiries are for family houses. Typically in Asia properties are smaller than in the UK and buyers keen to take up the opportunity of a larger property and outside space.

DS – Are there any particular areas in the UK that seem to be more popular for people in Asia for BTL or living in themselves?

RS – It’s mostly city centre locations like Birmingham, Manchester and, obviously, London. The London suburbs are also popular along with education-driven locations like the leading university towns.

DS – Has the UK Stamp Duty holiday made an impact on demand?

RS – Very much so! It has really helped drive demand in the past six months, and the recently confirmed extension is obviously good news.

DS – What about the additional 2% non-residents Stamp Duty?

RS – This has seemingly not made a difference to enquiry levels at this stage.

Three key financial issues for you to be aware of

The final answer from Rupert leads us onto three financial issues to be aware of if you’re considering buying a property in the UK in the near future.

  1. The UK Stamp Duty holiday has been extended to the end of September 2021

The Stamp Duty holiday, announced by the chancellor in July 2020, has given a valuable boost to the UK residential housing market. It was a key contributory factor in house prices rising by 4.7% in 2020, even during the Covid-19 pandemic. It’s now been extended to the end of September 2021, which is clearly good news for buyers.

  1. There’s an additional 3% Stamp Duty on second property

In 2016, the UK government introduced an additional 3% Stamp Duty surcharge on property purchases when the property in question was at least the second to be owned by the purchaser.

This charge is sometimes referred to as a “buy-to-let surcharge” but it’s applicable even if the intention is not to let the property out.

If you have a property in another country and want to buy a second home in the UK, even if you have no other properties here, you will still have to pay the higher rates of Stamp Duty.

  1. From 1 April 2021, non-UK residents will pay an extra 2% Stamp Duty

Last year the chancellor announced the introduction of new rates of Stamp Duty Land Tax (SDLT) from 1 April 2021 for buyers of residential property in England and Northern Ireland who are not resident in the United Kingdom. This means non-residents will pay an extra 2% Stamp Duty on all applicable band rates.

For example, on a £750,000 property purchase when it is a non-resident individual’s main property, the Stamp Duty will be:

  • £125,000 at 2% = £2,500
  • £125,000 at 4% = £5,000
  • £500,000 at 7% = £35,000
  • Total stamp duty = £42,500

This figure assumes no Stamp Duty holiday in force at the time of completion.

With respect to the 2% surcharge, you will be treated as a UK resident if you have been in the UK for at least 183 days in any continuous period of 365 days falling within the two-year window beginning 364 days before the purchase and ending 365 days after it.

How we can help

As you see from the figures we have quoted here, buying property in the UK, especially if it’s not going to be your main residence, can be an expensive business. If you’re looking at buy-to-let as a potential investment option, we can advise you on the costs, and how to structure the finances for maximum tax efficiency.

Get in touch

Please contact us by email or, if you prefer to speak to us directly, you can reach us in the UK on +44 (0) 208 004 4900 or in Hong Kong on +852 3903 9004.

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