How to invest in UK property from overseas

We loook at the steps international investors will go through when making an invstment in the parket market in the UK, alongside looking at the current UK investment hotspot.

Peter Scully | 26th September 2019

Property in the UK is widely recognised to be a great investment, but actually getting started in property investment in the UK can be a bit of a daunting task even for locals, let alone for people who wish to invest from overseas.

The good news is that it is perfectly achievable and here is a brief guide to what investors need to know.

International property investors are taxed slightly differently from UK-based property investors

Stamp Duty (paid upon the purchase of a property) and Capital Gains Tax (paid upon any profits from its sale) are payable at the same rates for both UK and overseas investors. (For the sake of completeness, UK residents buying or selling their main home pay different rates and in some cases nothing at all).

UK residents pay tax on their income, international property investors, however, have to register for the Non-Resident Landlord Scheme, through which they will be taxed on the profits from the investment profits they hold in the UK, but these profits will then be exempted from their taxed income in their home country.

The legalities of buying properties in the UK

First of all, overseas buyers should expect to be subject to due-diligence checks themselves, regardless of whether or not they are applying for a mortgage in the UK.

Basically, they will be expected to prove their identity and the source of the funds they intend to use for their property purchase. This process can be a lengthy one and overseas property investors should be prepared for this.

Secondly, overseas property investors should be prepared to get to grips with the leasehold system which is common in most, although not all, of the UK (Scotland has practically no leasehold property). In the UK most apartments are leasehold, especially if they are new-build and some new-build houses are also sold on a leasehold basis, again, especially if they are new-build.

Most leasehold property will be subject to “service charges”, basically charges to cover the upkeep of the communal parts of the building and grounds.

Some property which is not subject to leaseholds will still be sold on the legal condition that the purchaser agrees to pay service charges for the repair and maintenance of shared areas.

This is particularly likely in Scotland, which does not recognise leases but does recognise the need to have a system in place to ensure that charges relating to the entirety of a building (usually an apartment building) need to be shared fairly between the owners of the properties within that building.

Acquiring a UK bank account

Overseas investors may not actually need to open a UK bank account if they already have an account with an overseas bank which also has a presence in the UK.

In this case, they can either transfer their account to it or simply make use of its facilities. If this is not possible, then the main requirements for opening a bank account in the UK are proof of ID and proof of address, preferably in the UK, however some banks will accept proof of address in another country.

Generally speaking, banks which operate internationally are the most likely to do this.

Currency exchange

Regardless of whether or not investors open a UK bank account, they will almost certainly need to transfer funds to the UK and it is strongly recommended to be selective about the currency-exchange agent they use for this as it can make a substantial difference to the effective cost of their purchase. Pure Investor is partnered with Moneycorp which offers its clients market-leading rates on currency exchange.

The UK’s top investment hotspots

Although the London property market is currently experiencing a slowdown, the best bargains are still to be found in the Midlands and north of England, with Scotland, Wales and even Northern Ireland also offering good options for value-orientated property investors.

Manchester remains a compelling option as extensive home-building keeps prices affordable even though the city’s population continues to grow (and is forecast to do so over at least the medium-term).

Much of this population growth has been caused by young adults who are natural renters, hence ensuring strong demand. Liverpool is currently experiencing very strong growth and is finally stepping out from Manchester’s shadow and Newcastle is hot on its heels.

If you would like to discuss any property investment opportunities or are looking to sell your investment, feel free to call us on 0161 660 9684 or email us on enquiries@pureinvestor.co.uk 

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