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5 considerations when buying UK property

International investors buying UK property should realise there are a number of considerations to bear in mind, with five critical topics as Andrew Bates explains.
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Published 23 July
4 mins

If you are not based in the UK, but are looking to buy a property in the UK, what are the topics that crop up in our conversations?

If you are an international investor and have decided to buy property in the UK, there are a number of considerations you should bear in mind with regard to the financing. We have lots of conversations with clients on this topic, due to the complexities that may arise since you are not necessarily resident, or even domiciled in the UK. There are five issues that crop up more than others:

1. Find a mortgage provider with the right experience

For non-UK residents, a good approach is a lender based in an international finance centre, such as the Isle of Man, Jersey or Guernsey, not least as these typically have more experience of non-UK based borrowers. As they approach any conversation on a case-by-case basis, they can give you the bespoke support required. They are also typically geared towards higher value properties, with minimum loan amounts usually set from £250,000. As a general rule, any lender will only lend up to 60% to 70% of the property’s value, which means you will need to have a deposit of 30 to 40% to put down.

2. Watch out for hidden costs

When deciding how much you want to spend on a property, there are various associated costs that will need to be considered over and above the purchase price. These include mortgage set-up costs, legal fees and stamp duty. These also vary whether you are buying a home to live in or an investment property.

 

Once you have had an offer accepted, you will need to appoint a UK solicitor or a relevant professional to manage the purchase process for you so you are not just reliant on the estate agent.

Stamp duty is also payable and which is based on the property’s purchase price and is usually payable within 14 days of completing the transaction. The usual rate charged ranges from 2% on purchase prices over £125,000, up to 12% on transactions over £1.5 million. However, due to the economic fallout of the coronavirus pandemic, the UK government has put in a place a stamp duty holiday until April 2021, and which means the basic level of stamp duty will not be due on properties values up to £500,000.

 

If you own another property in the UK, or live anywhere else in the world (even if you are a UK national), there is also additional stamp duty surcharge of 3%. Meanwhile, for overseas buyers, the additional stamp duty levy increases to 5% in April 2021.

 

Capital gains tax may also be due on any profits you might make in the future if you sell the property.

 

It’s worth making sure that you choose the right lender that has experience lending to international clients and who can guide you now and in the future given any plans can change.

3. Get the right structure in place

Depending on the purpose of your investment, you can choose to buy your property in your own name, or through a company or trust structure. Often the simplest route in terms of the level of administration should be owning the residential property in your own name. And if you are not deemed to be UK domiciled, you can use a mortgage to fund a property purchase and mitigate your exposure to UK inheritance tax.


However, there could also be estate planning and asset protection benefits through owning your property through a structure, particularly when over the long term or in perpetuity. It’s important to be aware though that the impact of using a corporate or trust structure needs to be weighed against the effect it can have on your tax situation. The tax implications should always be looked at in detail using appropriate specialist advice – advice which Nedbank Private Wealth does not provide – based on your individual tax circumstances. Especially since the UK tax system is notoriously complex and changes on a regular basis.

 

4. Legislation and taxes change

In 2015, the UK government introduced rules that mean the cost of buying, owning and selling residential properties in the UK increased from a tax perspective, particularly for non-residents. These changes also include the introduction of non-resident capital gains tax.

 

Meanwhile, changes to the corporation tax treatment of offshore companies are due next year, and more changes are likely to come through, and other changes may also be on the cards as the UK government seeks to recoup some of the debt incurred in supporting the economic during the cornoavirus pandemic.

 

It is also important, however, to use a lender that has a long timeline of experience and a significant book of international clients so they can appreciate the complexities that arise and help you understand if, and how, the backdrop may change during the purchase process.

5. Ensure you have support for currency exchange

You should also look to use a bank that allows you to benefit from accounts in multiple currencies. This makes transferring large sums of money easy and cost-effective when competitive foreign exchange rates are available. Some lenders can also offer options such as ‘forward foreign exchange/currency contracts’, which enable you to lock in an exchange rate for a future transfer. This is invaluable for your budgeting as you will have the security of knowing what rate you will get on the day that you wish to make your transfer and not be held hostage by any unforeseen currency exchange events.

Clients can borrow against a UK, Isle of Man or Channel Island-based residence, be it a home or an investment property. We also lend against investment portfolios, and loans can be denominated in Sterling, Euros or US Dollars. With clients in 160 countries, we often help clients based outside the UK, and have lent using the same approach across market cycles since 1987.

 

To find out more about Nedbank Private Wealth’s bespoke lending services, please contact your private banker directly or call our client services team on +44 (0)1624 645000. Or you can get in touch using the links to the forms towards the end of this page.

Your home is at risk if you do not keep up repayments on a mortgage or any other loan secured against it.

about the author

Andrew Bates

Andrew Bates

Andrew has over 27 years’ banking experience and joined us from Lloyds TSB in Miami where he was responsible for providing banking and investment services to clients in Latin America and the Caribbean. He initially joined the bank’s Isle of Man office in 2004, and following secondments in the South Africa and London offices, he moved to the UAE in 2013.

 

Based in Dubai, Andrew is primarily responsible for the bank's international growth in both the private client and intermediary sectors in the Middle East. He is a Chartered Member of the Chartered Institute for Securities & Investment and recently graduated from the London Business School with an Executive MBA. Andrew also has full STEP membership, qualifying him as a Trust and Estate Practitioner.

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