Halo Financial and our team of expert partners have highlighted the key financial considerations when buying property in the UK. You also have the opportunity to get in touch with the relevant experts who can help you buy your UK property and provide more detailed information.
1. What is your total budget?
Make sure you include in your overall budget the full amount of money you will need to spend on your property – including all fees and additional costs – and include ongoing costs for the property, such as upkeep and maintenance.
2. Funding a property purchase in the UK
You have several options for this – with a mortgage, releasing equity from another property, or cash. If looking to take out a UK mortgage, it is worth noting that while, in theory, buyers of most nationalities are eligible for investment loans, there are now far fewer banks and lenders offering mortgages to international buyers than once was the case. There are some banks that offer a range of services to overseas buyers, including those looking to purchase a buy-to-let property, while UK nationals who live abroad are also catered for.
Overseas property buyers in the UK can often secure loans in their own country, for example, should you have established assets that can be charged against, or with an existing, mature relationship with their bank. There may be tax implications that will need to be addressed in this case, however. Speak to a tax specialist.
3. Additional costs of owning UK property
In addition to the actual cost of the property, you will need to think about the other costs – such as property viewings and visits to the country before buying the property, legal fees, agent fees, taxes, valuation and registration costs, and exchange rates when moving money between countries.
4. How currency market movements affect the price of your property
The price of your property in your home currency will be significantly affected by the movements of the currency markets during your purchase process, and the strength of sterling – especially considering the ongoing movements in the run up to Brexit.
The currency markets are incredibly volatile and are particularly affected by changes in the political and economic spectrum. An announcement one day can ensure a significant swing in the rate in either direction very quickly. This could mean that the currency rate you are looking at one minute, may well be considerably different in a very short amount of time.
For this reason, we recommend opening an account with a currency specialist as soon as possible. At Halo Financial, our personal currency specialist will be able to keep you updated on any particular exchange rate swings you should know about and discuss the previous performance of this currency, to help you plan for your international money transfers and make sure you get the best rate at the time that’s right for you.
Currency market volatility
David Johnson, Founding Director at Halo Financial, has monitored currency trends for over 20 years, seeing dramatic exchange rate movements in response to economic and political events. “Sterling has been immensely volatile since the fateful Brexit vote. Undoubtedly, the fall in the Pound has contributed to increased demand for UK properties from overseas buyers. As an example, from its high of $1.50 in June 2016, the Sterling – US Dollar rate has fallen to $1.19 on two occasions – its lowest level since 1985.”
5. Ongoing costs of owning property in the United Kingdom
You will need to ensure any regular bills, such as council tax and mortgage payments, are covered, as well as ongoing maintenance, amenities, and so on. Remember that if you are paying these in another currency, the same currency market movements mentioned above will affect the price of these payments. Consider any recurring and regular payments and discuss how you could potentially plan these in advance and save time and money with a currency specialist.
Once you have made your larger property payments, for the deposit and final house payment in the UK, for example, a currency specialist can also help you with any regular payments that you need to make in future.
By setting up a regular currency trade plan, you can set up automated international money transfers at intervals to suit you. This will enable you to make any regular monthly payments such as a mortgage or pension payments. You can even set a rate for planned future payments up to one year in advance.
6. Removals, shipping and furniture costs
If you are moving to the UK permanently, ensure removals costs are included in your overall budget.
There are numerous companies and the process can be complicated.
If you are purchasing a home for investment purposes, and therefore not planning on moving any belongings to the country, you will need to ensure that the house you buy is furnished or allocate budget to furnish it once you have bought it.
Bear in mind that unfurnished homes command less rental value than furnished ones, and are harder to find tenants for.
Find reliable suppliers and ensure you use long lasting furniture.
7. Inheritance implications
A new property purchase is likely to have a significant effect on your international estate. If you’ve got non-domicile status in the UK, then only UK-based assets will be liable for Inheritance Tax in the UK.
If you are UK domicile and your estate is valued at over £325,000, your estate will be subject to inheritance tax – either 40 percent or 36 percent on the amount over the threshold. You are classed as UK domicile if you have either spent more than 183 days in the UK during the tax year or if your only home is in the UK and you have spent at least 91 days in it in total and at least 30 days in the current tax year.
8. Open a bank account in the UK
While most major British banks – particularly those with global branches – do offer bank accounts to non-UK residents, quite often the services these accounts offer are limited. You will need to discuss your options with a number of banks to see which one offers the best choice for your particular needs – but we do recommend opening an account in advance of your property purchase, as this will help with securing the property you want as soon as you find it and make any currency exchange through a currency specialist quicker and easier.
9. Receiving international salary and pension payments in the UK
If you are moving to the UK long-term, it’s important to ensure that your salary or pension can be paid directly to you. If you are a British expat who is planning on moving back to the UK, and you have a Qualifying Recognised Overseas Pension Scheme (QROPS), then you are able to keep this when you move back. However, whether you will be will be liable for income tax on this will depend on where your QROPS is held and whether or not the country in which the QROPS is established has a dual taxation agreement (DTA) with the UK. Always consult an independent financial advisor (IFA) for any financial decisions of this nature and to find out what best suits your individual needs we can recommend trusted advisors.
10. Salaries and income tax in the UK
The average UK salary for the tax year ending 5th April 2018 was £26,500, according to the Office of National Statistics Average Annual Salary Survey.
The amount of Income Tax you pay in the UK depends on how much you earn. As of the 2018/19 tax year, those who earn less than £11,850 a year are exempt from paying any Income Tax. Those who earn between £11,851 and £46,350 will face Income Tax of 20 percent, those who earn between £46,351 and £150,000 pay 40 percent, while the highest earners – those who earn more than £150,001 – pay 45 percent.