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Today’s article in the Telegraph gives a warning to Brits who hold Spanish and other countries’ residency but still own UK property should watch out for Osborne’s announcement in the Autumn statement.
Once thought this would be only aimed at wealthy foreigners who own 2nd homes in London etc it is now muted to target Brits living abroad as well.
Could such a property sales capital gains tax be imposed immediately or with a date say next year, giving people the chance to sell prior and avoid such a tax, 28%? 🙄 🙄
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Bad idea. They already pay non dom tax per annum, higher stamp duty and in addition they protect/restore old/heritage properties which otherwise will be neglected. In addition they create employment and bring billion into the Country
£100 million tax is petty cash in comparison to investment benefit that £7 billion brings. Not all of them buy mansions many buy normal properties for the duration whilst their children are under formal education as a result the academic institutions will lose out.
The ones that need to chase are the Starbucks,Dell, microsoft etc of this world.
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Even though I’ll be affected by this, I think it’s a good idea. Much of London property has simply become an asset in itself – foreigners buy it and rather than restoring it or even living in it, they just leave it at that. Hence so many empty “ghost” areas in wealthier parts of London. As for foreign companies, I think enough has been written about how the Googles and Amazons of this world have avoided tax at the cost of local competitors.
As far as UK expats are concerned, if you’re living overseas and keep a house in the UK then that house has ceased to become your primary residence and you should pay tax on any rise in value while it is not your primary residence. I’m pretty sure that’s how it works in most countries. UK stamp duty as a percentage is still quite low, it just seems high because the UK government keeps inflating the market. It was worse in Spain during the boom – people could lose over a year’s income simply by paying tax on property purchases. You used to get it back through rebates if you worked in Spain, but now that’s gone.
However one thing they should do is re-introduce some kind of taper relief on CGT. Charging a flat rate of CGT on a property who’se value might have only gone up in line with inflation over the years is not really a capital gains tax – it’s just taxing people for owning assets.
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@logan wrote:
This is only a sales tax so the answer is not to sell any property if you are a tax resident elsewhere. Many have been doing that in Europe to avoid capital gains for years. It’s not difficult to do and saves a lot of money especially in France. Osborne has simply closed a loop hole.
Yes I expect the market for expat mortgages on UK property will take off now. My UK property is mortgaged for another 10 years and when that is paid off I’ll just take out another mortgage and release equity that way. Not only do I not pay any CGT but the mortgage interest payments can be used to offset income tax. Wealthy foreigners have always been able to take out loans against UK property anyway via wealth management funds. So the result might be less property coming onto the market as expats and foreigners are less inclined to sell.
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Like you chopera I think they must introduce some form of taper relief on this tax otherwise those who bought UK homes 10-20 years ago and then bought a place in the sun more recently, would get hit with enormous CGT if they sold the UK properties.
As logan says, to avoid it is not to sell it, but expect some will have to at some stage for care in old age etc.
The devil will be in the detail, and I doubt it will suppress the London property prices by much since many of those foreign owners are Oligarchs and other mega rich who won’t need to sell, of if they do, they can easily afford such tax.
It’s more likely to hit people who have a couple of reasonably priced properties, one in the UK and one abroad who may need funds sometime. 🙄
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If you want to sell or need to sell then revert your tax residency back to UK a few months before you do it. It’s just a simple paper process in most cases. However Chopera is giving very sensible advice. Rent out and use the equity for investment especially with rates so low.
I agree this move will discourage a small section of the UK market from selling, usually top end. Keeping prices high through continued lack of supply. It’s called bubble prevention.
The very opposite of Spain. I still fail to be astonished by the sheer volume of property currently on the Spanish market. It’s going to take years and years before the market is stable. That does not include the zillions who want to sell but feel it’s pointless going to market at current levels of return.
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The sooner the banks start destroying some of the excess property on their books the better. It is putting off buyers who need to search through tons of “crap” before having any chance of finding a property that might interest them, most of it has been hanging around for ages so buyers stop visiting their web sites, and once people realise properties are being destroyed they might be more motivated to “bag a bargain” before it is too late.
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Although I agree with your suggestion logan, this move by Osborne will have to start from some date, is it not possible the Revenue might consider switching residency as tax avoidance/evasion especially if same person switched back again afterwards or are you talking permanent switch back to UK residency? 🙄
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Ok, hello to all, and apologies if I am posting this in the wrong area. I am new here, and was not completely sure where to post my question.
I am moving to spain either later this year or early next year. I have been to spain for the past 27 years, and know 100% I want to make the move. I own a home in Spain already, and also own a home in the UK. As I am planning to become a resident in Spain, should I try and sell up in the UK before my move?
I really don’t want to be hit with CGT’s by having the two properties. I find it all a bit of a minefield but just want to make sure I am legal without getting hammered in taxes!
Sorry if this seems a silly question! Thanks in advance!
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@Suzy192 wrote:
I own a home in Spain already, and also own a home in the UK. As I am planning to become a resident in Spain, should I try and sell up in the UK before my move?
That would probably make the most sense as it’s still (I assume) your primary residence and as such would not be liable for CGT in the UK.
The one thing you do need to be mindful of is the timing of selling the UK House and becoming a fiscal tax resident in Spain as you may well become liable for Spanish CGT if they’re done in the same tax year. In other words you become a fiscal tax resident in Spain (having resided there for more than 183 non-cumulative days in any tax year) straight after you sell the UK house. You just need to make sure the house is sold in a different tax year to the one in which you become a spanish tax resident.
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Only you can decide as you know your circumstances best. However, I would not sell my house in UK and buy in Spain. If for reason of health,family etc you need to return to you UK you will not be able to buy, specially if it is London that you wish to buy, Besides the price, due to your age, lack of job you will not find many lenders offering an interest only mortgage & if you take a repayment mortgage your monthly payment will be very high. In short it looks like you will be burning your boats
Besides, above on the economic cycle Britain is ahead of the curve and the curve has just started moving north. Good luck in whatever you you do.
The grass always green on the other side. Irrespective of the number years you have been holidaying in Spain living there is a different story.
I would rent first for a longer period in the area that you want to live and see how it goes. I
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