UK property for non-UK residents

Recent changes to the tax on UK properties have big implications for non-resident owners.

The UK purchase tax (stamp duty) has increased significantly, with an additional levy placed on second home purchase. The additional stamp duty is due even if your other property is not in the UK. Capital gains tax of up to 28% on sale has recently been introduced for non-residents and applies to all properties sold after April 2016.

Owners of UK property pay Inheritance tax, even if they are not living in the UK or are not UK citizens. The standard rate is 40% with a marginal rate as high as 60%. Properties in France, Spain and Portugal have similarly high rates. UK citizens (regardless of residency) are also exposed to Inheritance tax on their worldwide assets.

Rules have also changed on wear and tear allowances for non resident landlords. Previously, a flat allowance of 10% of rent could be offset for tax, whereas now, deductible expenses can only be claimed as arising. This means an additional administrative burden tracking expenses and a potentially higher tax bill.

Finally, mortgage interest payments have now come under the scope of income tax. Previously, mortgage interest was a deductible expense against rental income, but new (and complex) rules have potentially increased the tax take on that rental income: HMRC have estimated an additonal GBP 665 million of extra taxes.