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UK government plans capital gains charges on expats UK properties
| Published: | 15 Aug at 6 PM |
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More bad news for British expat investors came with reports that Chancellor George Osborne plans to charge capital gains tax on the sale of expat-owned UK properties.
The new tax is supposedly aimed at wealthy foreigners investing in UK properties, but will hit hard on expat buy-to-let investors and those who keep a home in the UK. Over the last several years, UK property values have boomed, and overseas investors have not been liable to capital gains tax on sales.
The official announcement of the tax change is expected to be made in the Chancellor’s 5 December autumn statement. Although the exact rate of tax has not yet been disclosed, it’s expected to be the same as the normal capital gains tax rate of 28 per cent.
The stated reason behind the new tax is to ensure that people ‘pay their fair share’. Those expats affected may well consider that a ‘fair share’ would be the amount of charges for maintaining a similar amount in a conventional investment rather than an arbitrary amount set by a greedy government.
Expat investors with buy-to-let UK investments supplementing their meagre state pensions are not wealthy individuals buying luxury London high-rise units or mansions on Millionaires’ Row. The latter are not likely to be bothered by the charges, whilst the former may find it wrecks their investment plans for a comfortable retirement.
Financial and accountancy firms are already advising their overseas clients to sell their property portfolios and reinvest elsewhere. The knock-on effect of reducing the number of average rental homes available in London and major UK cities is expected to be considerable.
A glut of previously-rented properties has the potential to destabilise local housing markets, and the uncertainly of whether past gains will be grandfathered may mean that many expats decide to sell up before the tax is introduced next April. Non-domiciled buy-to-let investors at least have time to avoif the tax grab by transferring their holdings to a company or selling them off in advance.
The new tax is supposedly aimed at wealthy foreigners investing in UK properties, but will hit hard on expat buy-to-let investors and those who keep a home in the UK. Over the last several years, UK property values have boomed, and overseas investors have not been liable to capital gains tax on sales.
The official announcement of the tax change is expected to be made in the Chancellor’s 5 December autumn statement. Although the exact rate of tax has not yet been disclosed, it’s expected to be the same as the normal capital gains tax rate of 28 per cent.
The stated reason behind the new tax is to ensure that people ‘pay their fair share’. Those expats affected may well consider that a ‘fair share’ would be the amount of charges for maintaining a similar amount in a conventional investment rather than an arbitrary amount set by a greedy government.
Expat investors with buy-to-let UK investments supplementing their meagre state pensions are not wealthy individuals buying luxury London high-rise units or mansions on Millionaires’ Row. The latter are not likely to be bothered by the charges, whilst the former may find it wrecks their investment plans for a comfortable retirement.
Financial and accountancy firms are already advising their overseas clients to sell their property portfolios and reinvest elsewhere. The knock-on effect of reducing the number of average rental homes available in London and major UK cities is expected to be considerable.
A glut of previously-rented properties has the potential to destabilise local housing markets, and the uncertainly of whether past gains will be grandfathered may mean that many expats decide to sell up before the tax is introduced next April. Non-domiciled buy-to-let investors at least have time to avoif the tax grab by transferring their holdings to a company or selling them off in advance.
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