UK Buyers of Foreign Property Could be Hit by Tax Reforms.

UK buyers of investment properties and second homes overseas could be hit by the Chancellor’s recent raft of tax reforms as well as buyers of domestic properties. In particular, the change to stamp duty announced by George Osborne in the Autumn Statement may affect those buying a second property whether it is in the UK or not.

The stamp duty reform will take effect from 1st April, and will add a 3% surcharge to stamp duty rates for those buying a residential property other than their main home. This applies on the purchase of any property worth more than £40,000, which is true of the great majority of UK residential properties.

The changes were intended to target investors in buy-to-let properties, as a complement to previous measures designed to help owner-occupiers better compete with landlords in the UK’s property market.

However, some are concerned that the wording of the reform is too vague, and that it could affect a much wider spectrum of buyers than the government originally intended. The consultation document is lengthy, complicated and, some have argued, lacking in clarity. Some sections of the document seem to indicate that the rules apply only to the purchase of properties located in England and Wales, which would fit the government’s apparent intentions in introducing the surcharge. Other parts of the document, however, seem to suggest that the charge would be levied on the purchase of any investment property or second home by a UK buyer, located anywhere in the world.

If the rules were applied to those buying overseas property investments as well as in the UK, the consequences could be significant. Every year sees around 35,000 taxpaying British residents buy an overseas property, and all of these could potentially be affected by the new rules.

There are other unintended consequences that, according to some experts, the lack of clarity in the new rules could lead to. For example, there are fears that the laws could potentially apply to people who are neither landlords nor second home buyers in the usual sense. Parents who help out their children with their first home purchase could potentially be hit with the stamp duty surcharge, as could those who buy properties in order to provide a home for a relative whose financial situation is tighter than their own. These non-commercial landlords and property buyers are already in the unenviable position of being subject to capital gains tax when they sell but missing out on tax relief for repairs and other ongoing costs while they still hold the property.

There are calls for the government to spell out, clearly and definitively, exactly who the 3% surcharge will apply to and who it will not. In the meantime, however, uncertainty continues and the contents of the consultation document shed little light, with some sections seeming to outright contradict others.

Mark Burns

Mark Burns is a Director and Property Investment Consultant at Hopwood House. With over 10 years' experience in property investment, Mark has provided investors with a wide range of opportunities in exotic locations around the world.

You May Also Enjoy

how to present your property for sale
Estate Agent Talk

6 Property Management Marketing Strategies For And Beyond

Did you know that over 70% of individual renters find their new homes on the­ internet? In our current digital e­ra, a sturdy online existence­ isn’t just an extra for property management firms—it’s a critical need. Nonethele­ss, with innumerable property administrators scrambling for visibility, how might your firm gain promine­nce? The solution is a de­tailed…
Read More
Estate Agent Talk

Strategies for Successful Real Estate Investment: Emphasising Luxury and Privacy

The appeal of luxury real estate lies in its ability to combine opulence with exclusivity, offering more than just a property but a lifestyle investment. For those seeking to enter this lucrative market, understanding the nuances of where and how to invest is crucial. As we navigate through key strategies for successful real estate investments,…
Read More
Estate Agent Talk

Leasehold and Freehold Reform Bill – Thoughts from the Industry

The Leasehold and Freehold Reform Bill has become law with the Act making it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges. The Act will also remove barriers for leaseholders to challenge their landlords’ unreasonable…
Read More
Who are Rentd
Letting Agent Talk

Renters (Reform) Bill Dropped – Thoughts from the Industry

The Renters (Reform) Bill has been dropped as a result of the general election being called. Here are some thoughts from within the property industry. Ben Beadle, Chief Executive of the National Residential Landlords Association: “It is hugely disappointing that this Bill will not now make it into law. The news comes despite the fact that…
Read More
Estate Agent Talk

July 4 General Election – Thoughts from the Industry

Prime Minister, Rishi Sunak has called a general election for July 4, 2024, citing now being the time for the people of Britain to choose the next government. Here are some thoughts from within the property industry. Tim Bannister, Rightmove’s property expert: “A look back at recent elections shows that house prices and activity usually…
Read More
Rightmove logo
Breaking News

Rightmove’s weekly mortgage tracker

Matt Smith, Rightmove’s mortgage expert said: “Today’s inflation drop feels like an important milestone on the road to the first Base Rate cut. There’s been some to-ing and fro-ing over whether we’ll see a summer Base Rate cut, but today’s news will likely reinforce some of the positive words coming from the Bank of England…
Read More