Introduction to United Kingdom

The most important element is that the banks are asset based lenders and therefore they are more interested in the value of the asset and the rental income of the property than they are in the individual. If an individual earns above £25,000 (R300,000) per annum, the bank will consider the individual for an asset based mortgage.

1.      Mortgage Application Form (completed and signed) (If purchasing through a co/trust all rel. docs pertaining to this)
2.      Fee Agreement (signed)
3.      3 months ‘payslips’ or accountants reference letter to confirm salary (required if clients are self-employed)
4.      6 months personal bank statements
5.      Copy of passport
6.      Address verification by way of a letter from an accountant or lawyer or a utility bill (must show full residential address)

What about income tax?
Income tax will be levied in the UK at 19%. This can be mitigated by careful tax planning.

What about capital gains tax?

Capital gains tax is relevant in the UK to residents, unless you purchase through an offshore structure. Non-residents should not be subject to CGT in the UK on the profits made from the sale of a UK property.  Care must be taken to ensure that the operations in the UK do not create a “permanent establishment” which could trigger a corporation tax or income exposure.

 

What about Inheritance Tax (“IHT”)?
UK IHT is chargeable on the death of an individual who owns UK property regardless of where he/she is domiciled or a tax resident. For a non-resident who dies owning UK property the IHT is calculated at 40% of the excess of the value of the property over £285,000. Where a person had more than one property, tax is calculated based on the excess of the combined values over £285,000. For a UK non-resident the exposure to IHT can be minimised by arranging ownership offshore.

 

How does Stamp Duty Tax work?
Transfers of UK property are subject to stamp duty at a rate depending on the market value, not the transfer price.  Currently the rates for residential property are:

 - Up to £174,999                Nil
 - £175,000 to £249,999      1%
 - £250,000 to £499,000      3%
 - More than £500,000         4%

 

Stamp duty is charged on a transaction basis, not on a property by property basis.  So that, if a number of properties were sold together, or in a related transaction, the applicable rate would be determined by reference to the combined values of the properties sold.

Stamp duty land tax is not charged on the transfer of shares in a company holding property.

 

Can I use an investment vehicle?
Yes you can setup an offshore, trust or company, but we suggest you speak to a specialist about this, especially if you are concerned about inheritance tax. Most overseas residents who invest in UK property choose to do so directly as this is generally simpler and often more tax efficient.