Key considerations for overseas buyers looking to purchase a property in the UK

The UK residential property market remains a strong and stable proposition for overseas buyers. Whilst there are no ownership restrictions, foreign buyers should consider Stamp Duty Land Tax (SDLT) surcharges, tax obligations, financing challenges, and legal requirements before making a purchase. Here are some key points for consideration:

Identify the right location

Make sure you do your research so that you know the area in which you are looking to buy. Pay particular attention to which areas are seeing price rises and any areas which have been identified as ‘up and coming’.

Identify the right type of property

Consider which types of properties are selling and renting quickly in your preferred area.

Are you looking to buy a house or a flat? Houses tend to be freehold, whereas a flat is likely to be leasehold – you need to be sure you understand the distinction.

Know your budget

There is more to buying a property in the UK than just the sale price. You need to budget for all the additional costs – legal fees, agents’ fees, land registry fees and SDLT.

Understand your mortgage options

If you intend to borrow money to buy your property, as an overseas buyer, you may need to talk to a specialist lender, especially if an offshore company is involved.

Many UK lenders offer mortgages to non-residents, but their lending criteria can be much stricter. They may require larger deposits and you may be subject to higher interest rates.

Consider tax implications

Before committing to a property purchase, take advice from a tax advisor, so that you have a full understanding of any tax implications associated with your purchase, including, but not limited to, SDLT, Capital Gains Tax and income tax.

Be aware of Stamp Duty Land Tax and related surcharges

The UK government places an additional 2% surcharge which applies on top of all other residential rates (including the higher rates for additional dwellings) on non-UK residents who purchase property in England and Northern Ireland. For the purposes of calculating the surcharge, a buyer will be treated as a non-resident if they are not present in the UK for at least 183 days during the 12-month period prior to their purchase.

It is possible to claim a refund of the additional 2% surcharge if, after you complete your purchase, you are present in the UK for at least 183 days during any continuous 365-day period that falls within the two-year period ending 365 days after the date of completion.

There is an additional 3% surcharge added to the standard SDLT rate where you (or your spouse or civil partner) own more than one dwelling anywhere in the world. If you already own another property (which you do not intend to sell) you are advised to discuss your SDLT position with your solicitor.

Decide how you will own your property

Different property ownership options carry different potential tax liabilities.

Before you proceed with your purchase, you should consider the various options – personal ownership, company ownership and the creation of a trust – to see which option best suits your circumstances.

Consider the documentation you will need to buy a house in the UK

You will typically need proof of identity, proof of funds (and documentary evidence of their source) and a UK bank account. Further documentation may be required for your mortgage application.

As you can see, there’s a lot to think about, so it makes sense to take professional advice before proceeding with your purchase of a UK property.