Foreign Investors Act Before April 2021
As I have been doing some research into different taxes that effect property investors. (More on that in my post – Property Tax for Beginners) I came across something that doesn’t really effect me. But I couldn’t not share it. If you are investing in UK property from abroad, you will soon be faced with a Stamp Duty surcharge of 2%. So my advice to foreign investors, act before April 2021.
Also bear in mind – when I refer to foreign investors the same is also applicable to Expats looking to invest in the UK market. I’m afraid to say – you’ll also be hit by the 2% surcharge coming into force.
Sorry, But I’m Afraid It Gets Worse…
The 2% surcharge is ON TOP of the 3% surcharge that investors already pay when buying a second property!
That’s right, I said it. I’m sorry to be the bearer of bad news.
So what will this charge actually look like?
Details of exactly how this will be charged is not available on the gov.uk website at the moment. So I can only guess it means 2% added to every bracket as it relates to purchases of a second property. This would look as follows:
For Residential Properties, Any property over the value of £40,000. (Note, for any updates please see the government website).
|Chargeable Bracket||Tax Rate|
|£0 – £125,000||3% + 2% surcharge = 5%|
|£125,000 – £250,000||5% + 2% surcharge = 7%|
|£250,000 – £925,000||8% + 2% surcharge = 10%|
|£925,000 – £1,500,000||13% + 2% surcharge = 15%|
|over £1,500,000||15% + 2% surcharge = 17%|
What about after April 2021, how will the market be affected?
Well, if only I had a magic ball. It’s a shame really …. Although if I did, I would probably use it to guess the winning lottery numbers!
Ok, serious talk.
My best guess would be that we start to see a decrease of foreign investment in the UK property market, after all – why would you accept just handing over an additional 2% to the HMRC coffers?
What that is likely to translate to is a decrease in prices in city centre’s. That tends to be where most foreign investment is. The big cities are likely to feel the biggest impact here, with London taking the lions share.
As a domestic buyer, if you’re looking to invest in those areas soon – I’d hold off for a little while if I were you (That’s if Coronavirus hasn’t already put you off). This is especially applicable to investors who are in the buy to flip game, the price uncertainty is just a little too risky for my liking.
It’s not all doom and gloom.
As a domestic buyer if you’re prepared to sit tight, wait until April 2021 comes and goes. The outlook may not be so bleak. By that point we should see prices take a fall in city centre locations (if my predictions are correct that is). We will also have a better idea of the impact COVID-19 has had on the market.
These two things added together, might make it the perfect opportunity to invest in city centres. Get the location right and you could end up making a killing!
That’s all for now folks. Let me know what you think by tweeting your comment!
Take care, I wish you all the best!