Foreign Property Tax UK Guide [2023]

A UK resident that owns an overseas property is at risk of being taxed twice on any income or gains.

This comes from both the jurisdiction of the property’s country and the UK (as outlined above).

This is double taxation.

However, the good news is that the UK has double taxation agreements with many countries.

A double taxation agreement contains a set of rules outlining which country has the right to collect the tax in certain situations.

If the agreement places exclusive taxing rights in the UK, for example, it is only paid in the UK. This overrides UK domestic law, as well as the domestic law in the other country.

If there’s no double taxation agreement in place, you may still be able to get tax relief for any foreign taxes you pay against your UK tax bill through a foreign tax credit.

The foreign tax authorities will also charge tax on your letting profits.

But you don’t have to pay twice – the overseas tax paid is usually deducted from the UK tax that is due.

Just like capital gains tax in UK on foreign property, those who profit from selling property in the UK are subject to capital gains tax.

This is only applied to the profit earned after selling your asset.

The amount of tax paid depends on the level of profit earned – among other factors.

Non-UK residents are subject to non-resident capital gains tax.

You’ll pay this if you’re:

• Not a resident of the UK.
• A representative of a non-resident who has died.
• A non-resident trustee.

This tax is payable for both the direct and indirect disposal of UK property or land, and you have 60 days from the date of conveyance to pay.

The amount of tax paid is determined by whether you’re an individual, company, or trust – as well as by what type of property you’re selling.

For example:

• A non-resident individual – pays 10 or 20% tax if it is a non-residential property. For residential property, CGT is 18% or 28%.
• A non-resident company – pays a flat corporation tax of 17%.
• A non-residential trust – pays 20% tax on non-residential property, and 28% for a non-residential.

In buying UK property, foreign buyer tax on stamp duty is also expected.

Stamp Duty Land Tax is paid when you buy houses, flats and other land/buildings over a specific price in the UK.

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.

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 as of April 2021.

The rates are 2 percentage points higher than those that apply to purchases made by UK residents. This surcharge applies to purchases of both freehold and leasehold property, as well as increasing the SDLT payable on rents on the grant of a new lease.

Why invest in UK property?

Well, to be frank, with the current state of the market, it’s difficult to come up with reasons why not to.

This is probably one of the most profitable and continually growing ventures to invest in at the moment. With prices continuing to rise for the foreseeable future, it’s also probably the best time to get involved.

To reiterate, research every aspect of a potential investment venture thoroughly before making any final decisions.

Like most things, if you put the work in, then the best opportunities will land in your lap!