For those expats who have decided to make the move from the UK to a destination overseas but still own a property in the UK, the new property tax changes can cause problems for any financial plans they have put in place.
Recently, the amount of tax paid by landlords has increased and this has been pushed by the Chancellor George Osborne and he certainly didn’t go easy on expats either as they are also included in his plans to increase revenue for the treasury. These changes will see expats pay more tax when it comes to selling their home than those who currently own a home in the UK.
What should expats look out for?
Landlords and those who owned second homes were permitted to move abroad and also be classed as non-resident for tax; this was up until April 2015. Therefore, they had the opportunity to sell their property without having to pay capital gains tax on any profits.
However, new rules have been put in place for expats and this means that they now have to pay capital gains tax at the same increased rates of 18% and 28% as buy-to-let landlords, this came into effect from the 6th April 2015. It is not possible for expats to offset any expenses that they have acquired before that date in an attempt to reduce their tax bills.
If a UK home is owned by a company, the government will require that company to pay more tax every year and this figure is set around the value of the property. This starts at £500,000 for which the tax will be £33,500
It is no longer possible for expats to qualify for principle residence relief, as it removes them from having to pay capital gains tax on any property that could be classed as their main home. Expats can only claim private residence relief should they be a tax resident in the country where the property is located or if an expat is a resident in that property for 3 months (90days).
As the stamp duty for second home owners was introduced this year, it also means that expats are susceptible to this charge. The rate is set at 3% but this rate is increased for companies with the rate reaching a maximum of 15% for properties worth over £1.5million. These are not the only changes that chancellor has up his sleeve because there are other changes waiting to be implemented for both expat homeowners as well as landlords.
One potential change could be the fact that expat landlords who are paying 40% or more in income tax will see their mortgage interest relief slashed by half. This will be spread out over the next three years. For those homeowners who are non-residents as well as companies will also have to pay inheritance tax on homes.
Gower Accountancy are experienced chartered accountants in Leicester, specialising in bookkeeping and accountancy services including tax planning and business start up advice.