Can Foreigners Buy Property in UK Areas? - Your Questions Answered

Yes, foreigners can buy a property in the UK on a mortgage, but you may encounter some issues.

This is because many UK lenders will not be willing to lend to a non-UK resident, which means you will have fewer options available or encounter higher interest fees or larger deposits.

To avoid this, you can use the services of specialist lenders or international banks to get help securing a UK mortgage for residential property. Keep in mind, though, that these organisations will consider whether to lend based on various factors, including age, income, and credit score.

So what foreign property taxes should you know about? By purchasing property in the UK or renting it out, you’ll be subjected to various taxes. This can include Income Tax, Capital Gains Tax, Stamp Duty Land Tax, and Inheritance Tax.

Income Tax for Foreign Buyers

In the UK, the money you earn from rental income is taxable.

If you’re a non-UK resident, you’ll only be taxed on your UK income, not the income you earn elsewhere. Even if you’re classed as a UK resident for tax purposes, if you spend six months or more abroad, you’ll be classed as a “non-resident landlord.”

You can choose to pay tax on your income in two ways.

1. You can earn your rental income in full and then pay tax through a self-assessment tax return.
2. You can allow your lettings agent or tenant to deduct the tax automatically.

To take the first option and fill out a self-assessment tax return, you’ll need to apply. You can do so by filling out form NRL1i and sending it to HMRC.

If successful in your application, HMRC will then inform your tenant or letting agent not to deduct tax from your rent.

To get your rent automatically tax deducted, your lettings agent or tenant will deduct tax from the rent at a basic rate (20%) after allowing for any expenses. They will then give you a certificate at the end of the tax year to show how much tax has been deducted.

Stamp Duty Land Tax for Foreign Buyers

When buying property in England and Northern Ireland, you are subject to stamp duty land tax.

This is a tax paid on the purchase price of a property.

A similar system is in place in Scotland and Wales, but the tax has a different name and is paid at a different rate than SDLT. You can learn more by checking out our full guide to Stamp Duty in 2024.

If you’re buying a second property that is not your home, you will be subjected to an additional 3% charge on top of standard stamp duty rates.

However, as a foreign buyer, you’ll also pay an additional 2% surcharge.

This applies to all non-resident transactions, even if you intend to live in the property, regardless of whether you already own a residential property.

You must pay the surcharge when you buy a residential property for £40,000 or higher.

See below for the latest stamp duty land tax rates for foreign buyers in 2024:

SDLT Example for Overseas Landlords

Let’s say you’re a foreign buyer purchasing a UK buy-to-let property in 2024 for £350,000.

You will pay a 2% charge on the first £250,000 and a 7% charge on the remaining £100,000.

This will leave you with a stamp duty tax bill of £12,000.

You’ll then have 14 days to file a stamp duty return and pay the stamp duty fee.

There are many reasons the UK is seen as an ideal place to buy a property compared to other nations.

1. Considerable Capital Growth With Growing House Prices

Investors stand to earn significant capital growth in the UK thanks to considerable property price growth in 2024.

Back in 2021, the UK experienced a record-breaking year that saw house prices rise to £254,822 on average in December 2021 according to Nationwide – the highest ever amount.

Prices grew so fast in 2021, in fact, that Nationwide recorded the highest growth in 15 years.

Factoring in further growth predictions and it’s clear that investors can expect huge returns on their investments in the coming years.

Savills has also predicted that UK prices could climb as high as 11.7% in the North West and Yorkshire and The Humber by 2027.

2. Rising Rent and Rental Yields

Alongside a thriving property market, the UK rental market is also seeing incredible growth.

According to the HomeLet Rental Index, the average UK rent reached £1,199 in April 2023 – up 9.9% compared to last year.

This has led to some astounding rental yields in the UK, with the likes of Liverpool and Manchester known to generate returns of over 7% in certain postcodes.

These yields are far higher than other countries in the world, with popular spots like Shanghai generating an average rental yield of just 2 – 4%.

With so many opportunities to make high rental returns in cities like Liverpool, it comes as no surprise that buying property in the UK as a non-resident is an increasingly attractive venture.

In a report by Savills, it was found that in the wake of the Covid-19 pandemic, more people are reconsidering what they want from a home and are choosing to rent before committing to a property purchase.

With further tenant demand and already high rental yield figures, the future of the UK rental market certainly looks bright for both local and foreign investment in the UK property market, and focusing on high-yielding areas like Liverpool is one of the best real estate investment tips to consider.

If you’re a foreign investor and don’t have the cash available to buy a UK property outright, you may be wondering how much it costs to buy a UK property when factoring in mortgage deposits.

A buy to let mortgage deposit is usually around 25%, with a buyer also needing to cover stamp duty land tax, legal fees, and land registry fees.

This means for a UK property worth £100,000 – likely the lowest you’ll find – overseas buyers can expect to pay an estimated upfront cost of around £31,200. This is without factoring in other potential expenses like a property survey and higher deposits charged by mortgage lenders if you’re an overseas buyer.

You’ll also need to consider the running costs of owning and managing a rental property as a property investor.

This can include:

• Mortgage payments
• Ground rent
• Property management fees
• Maintenance costs
• Landlord insurance
• Income tax

Learn more by speaking to an advisor or reading our full guide on how much money you need to invest in UK property.

RWinvest is an award-winning property investment company with 18 years of experience in residential and student property.

We have vast experience delivering world-class property developments to overseas buyers, with properties available in major UK locations like Liverpool, Manchester, Birmingham, and London.

With over 1,000 five-star reviews, RWinvest was named the North West’s Best Property Business in 2020.

You can feel confident knowing you’re getting unrivalled service when you choose to invest with us. Contact us today for a chat with one of our expert property agents to see what options you have available.

Learn more about us by reading our website today. You can also familiarise yourself with our easy sales process, where you can make a property investment in just three steps.