How a foreign investor can benefit most from UK property investment
Nearly three years ago, Chancellor George Osbourne dealt a big blow to foreign investors when he announced that capital gains made on UK property investment by foreign investors would be taxed. At the time he said, “It is not right that those who live in this country pay Capital Gains Tax when they sell a home that is not their main residence, but those who don’t live here do not. That is unfair, so from April 2015 we will introduce Capital Gains Tax on future gains made by non-residents who sell residential property here in the UK.”
This move was seen as closing a tax loophole, and increased the tax burden of foreign investors. Setting up a limited company to buy property in the UK is a property investment strategy being increasingly used to reduce this tax burden.
London property hotspots are core picks for foreign investors
Despite the capital gains tax changes, and the associated scaremongering of many, foreign investment in UK property has not declined. In fact, when it comes to property investment strategy, buying in London property hotspots forms a key and growing element for foreign investors, and numbers are growing. For example, Knight Frank’s Super Prime London Insight report (2015) said that “the number of Middle East buyers rose to 16 percent from 11 percent on the back of geopolitical instability in the region.”
There are a number of factors that attract foreign investors to London property hotspots and the wider market. These include:
- The fall in the value of sterling has provided a natural discount to market for foreign investors
- London property hotspots are seen to provide a safe place for investment
- The country is seen as politically stable, despite the uncertainty of the EU Referendum and a possible Brexit and its potential implications on property investment.
By setting up a limited company to buy UK property, the foreign investor can continue to benefit from these strong property fundamentals with a property investment strategy that minimises tax liability. Instead of paying capital gains tax at 28%, corporation tax is liable at 20% – that’s an immediate saving of £80,000 per £1 million of gain. On top of this, costs and expenses are more easily allocated within the company structure, reducing the tax bill further.
Is setting up a limited company to buy property easy for the foreign investor?
Increasing numbers of UK investors are setting up limited companies for their property investments to benefit from the tax advantages of doing so, and the process for foreign investors is no different. The company will need to be registered with Companies House, and have at least one director and shareholder. Of course, you’ll need an official company address, which must be in the UK – typically this will be the address of your UK accountant or other representative.
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Forming the company couldn’t be easier. Providing you have taken care of the basic requirements for setting up a limited company for your property investment, it can be incorporated by using an online process or by postal application to Companies House. Most people use an online company formation agent: setting up a limited company to buy property in this way takes just a few hours.
Best of all, you don’t even have to visit the UK, speak to anyone on the telephone, or post supporting documents: the whole process is dealt with electronically.
If you want to benefit from a property investment strategy that takes advantage of London property hotspots in the most tax efficient way, and you are either a foreign investor or British expat living abroad, don’t hesitate to get in touch with Gladfish today on +44 (0)207 923 6100.
Have you set up a limited company to buy UK property? How easy did you find it to do? What are your biggest concerns about investing in UK property? Let us know and we’ll discuss it here.
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