Buying Property Abroad and UK Tax Liabilities

Summary: The British tax treatment of an overseas property will depend entirely on the tax status of the individual purchaser. If you are thinking about purchasing property abroad you need to be aware of your tax status and potential liability.

Property prices across Great Britain may have soared beyond belief but property costs in many popular overseas destinations have been increasing significantly as well.

Cyprus and Spain are two such countries where the price of property is on the steady increase and where many Brits dream of owing a second home...whether for retirement, holidays, rental income or a combination of all three!

The British tax treatment of an overseas property will depend entirely on the tax status of the individual purchaser.  If you are thinking about purchasing property abroad you need to be aware of your tax status and potential liability.

If you are UK Resident, Ordinary Resident and Domiciled then your UK Income Tax liability will be as follows: -

Income from the overseas property will be liable to full UK income tax.

Your Capital Gains Tax liability will be: -

Gains arising from the sale of the overseas property will be liable to full CGT in Great Britain.

And the Inheritance Tax liability will be: -

The house will fall fully within the owner’s estate for British IHT purposes.

If your status is not UK Resident, Ordinary Resident or Domiciled then your Income Tax liability in this case will be: -

Income from the overseas real estate will not be liable to any British income tax.

Your CGT liability on your house abroad will be: -

Any gains arising from the sale of the overseas property will not be liable to UK CGT.

And the IHT liability will be: -

The property will not be subject to IHT in Great Britain.

If you are UK Resident and Ordinary Resident but not Domiciled in the British Isles then you can expect your Income Tax liability to be: -

Income generated from the foreign real estate will not be liable to any UK income tax unless the income is remitted to the UK.

Your Capital Gains liability will be: -

Any gains arising from the sale of the house abroad will not be liable to any UK CGT - again, unless remitted.

And finally, your inheritance taxation liability in the UK will be: -

The home abroad will not be subject to British IHT as the overseas assets of a non domiciled individual do not apply.

If you’re interested in buying property in the UK and reducing your taxation burden, Shelter Offshore recommend the following: -

Using a Property Company to Save Tax

Carl Bayley

If you are putting money into property one of the biggest decisions you must make is whether to invest personally or start your own property company.

There are lots of reasons for starting a company but probably the most important one is to SAVE TAX.

In fact the potential tax savings are so large that we decided to devote a whole guide to the subject. Our analysis shows that, by following certain techniques, you could earn almost 34% more income by using a company to invest in property.

There are also a number of traps to avoid and pitfalls to negotiate so it is essential that you arm yourself with all the relevant facts. This guide looks at the whole picture and explains ALL the tax consequences of property company ownership.

Like all Taxcafe guides, Using a Property Company to Save Tax is written in plain English and contains numerous examples and tax planning tips. Subjects covered include: -

How to get started and traps to avoid.
The non tax benefits of using a company.
How to borrow money in the most tax efficient way.
How to achieve an instant increase in your after-tax rental income.
How long term investors can earn 34% more income by using a company.
How you could end up with 13% more capital profit using a company.
Detailed tables of company tax savings.
How to maximise Taper Relief when you sell properties.
Tax benefits of property management companies.
Advice for both property traders and buy-to-let investors.
How to go about setting up and running your own company.
How to sell properties or the whole company and pay the minimum tax.
How to transfer existing properties into a company.
A-Z of corporation tax, clearly explained.
A-Z of stamp duty and VAT.
Detailed examination of the dangers and drawbacks and how to avoid them.
Examples are used to explain every important point. We also use a series of very detailed but clear examples to compare company and private property ownership.

Click here to order a copy directly from Amazon!

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