It always used to be quite common for Expats to buy a property or 2, then rent them out for a few years, and then sell them at some point. Paying a bit of tax on the rental income, and then nothing when the property is sold.
There have been 3 changes that relate to Expats:
1. Capital Gains Tax (CGT)
CGT is now due on EVERY property sold in the UK.
Since 6 April 2015, whenever you sell a property, Expats included specifically – you will have CGT to pay – you WILL get relief for the period before this date when you also owned the property.
2. Mortgage Interest restricted as a deduction for tax purposes
From 6 April 2017 you will NOT be able to claim 100% of the mortgage interest paid as a deduction any more for tax purposes.
What does that mean exactly?
It means that in each tax year you can get a deduction against profits for your mortgage interest paid as follows:
Mortgage Interest Paid
2016/17 100% relief against profits (the current and the last year in which this can happen!)
2017/18 75% relief against profits
2018/19 50% relief against profits
2019/20 25% relief against profits
2020/21 20% relief against profits (actually Basic Rate relief – currently 20%)
3. Stamp Duty rates have gone up!
New Stamp Duty (SDLT – Stamp Duty Land Tax) rates came out in December 2014.
This has received lots of press in the UK and affects ALL purchases of property in the UK – for 1st time buyers, for people buying a place to live in, or for BTL investors.
The stamp duty (SDLT) hikes for BTL investors refer to an extra 3% at every level of property ownership. So in terms of where we are:
There are 5 bands of SDLT.
Band Rate Normal Rate Additional Property
1. <£125,000 0% 3% 2. £125k – £250k 2% 5% 3. £250k – £925k 5% 8% 4. £925k – £1.5m 10% 13% 5. >£1.5m 12% 15%
What can you do now?
Be aware of these changes that affect all properties in the UK, such that
1. You WILL have CGT when you sell a property, as well as
2. You WILL have enhanced SDLT to pay when you buy a property, and
3. You WILL have mortgage interest restricted as a tax deduction.
For more information and advise please contact: firstname.lastname@example.org