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Advantages of Buying UK Property

Real estate in the United Kingdom signifies reliability and stability because the country is known for its economic prosperity. UK properties are expensive, and they constantly grow in value. If you want to make a secure and profitable investment, purchasing a UK property could be a good idea.

Apart from the opportunity to rent out and re-sell your UK property at a higher price, purchasing British real estate can be attractive for several other reasons. For example, foreign nationals are allowed to buy any property they like, from a family flat to a large period mansion in a prestigious London borough. British taxation system also offers a major advantage since there is no annual property tax per se; it means your post-acquisition costs are lower.

This explains why people of all ages consider investing in UK properties, from young people who want to study in prestigious British universities and build their careers in a country with a stable economy to wealthy retired people who seek comfort and safety.

Peculiarities of Purchasing UK Property

Before you buy a UK residential or commercial property, you need to look into the legal side of the purchase and ownership. Title to a property does not automatically lead to an Indefinite Leave to Remain (ILR), citizenship, or benefits; however, it provides governmental protection the same way as for a British national.

The seller is not liable for any defect or damage found after the purchase. That’s why, it’s so important to ask for professional advice and help. Experts will evaluate the property and make sure everything is in order before you buy it. It will save you from unexpected costs in the future.

If you decided to purchase a property in London or any other major city in the UK, it is not just the purchase price you need to think about, but also potential taxes and expenses. In some cases, additional costs can make up to 20% of the purchase price.

Taxes on UK Property and Other Costs

You should not forget that the purchase price is not the only payment you must pay. There are many other payments you need to bear in mind when buying a UK property. For more information, continue reading this article.

Stamp Duty Land Tax

Any type of UK property (land, a flat, or a house) is taxable with a Stamp Duty Land tax (SDLT). The tax rate depends on the following factors:

Buyer’s nationality: non-UK residents have to pay more from 1 April 2021.
Property location: there are different tax rates and criteria for England and Northern Ireland, Scotland, and Wales.
Property value: the lower the value, the lower the tax rate.
Buyer’s ownership in the UK: whether it is their first UK property.

SDLT rate for residential properties in England and Northern Ireland

Property value (£)	First UK property for a UK resident	Additional UK property for a UK resident	First UK property for a non-UK resident	Additional UK property for a non-UK resident
Up to 250,000	0%	3%	2%	5%
The next 675,000* (from 250,001 to 925,000)	5%	8%	7%	10%
The next 575,000* (from 925,001 to 1,500,000)	10%	13%	12%	15%
Over 1,500,000	12%	15%	14%	17%

Notes:

*SDLT is calculated separately for each of the above portions of property value and added together.

If you’re buying your first home, you don’t have to pay any stamp duty as long as it costs less than £425,000. If it costs less than £625,000, you must pay 5% on the portion from £425,001 to £625,000. If the price is more than £625,000, use the table above.

Other Costs

SDLT is not the only tax that buyers of UK properties must pay. The UK real estate agents usually act in the sellers’ interests. If you want to make a good deal, you will need professional assistance from independent experts. Such assistance will add to your purchasing costs:

Conveyancing fees starting from £2,000;
Costs for requesting a government report that start from £700;
Survey fee of around £1,000;
Sometimes, additional costs to get help from third parties: lawyers who act on behalf of a housing management company or other individuals involved (the sum is agreed upon on a case-by-case basis).

If you plan to take out a mortgage to purchase a UK property, you will have to consider the following expenses:

Mortgage arrangement fees payable to a mortgage company – up to 1% of the mortgage, the average is £1,000.
Mortgage broker fees – around £1,000.
Valuation fee payable to a mortgage lender – around £800.

Post-Acquisition Costs

Ground Tax

If you do not own the land that your house or flat sits on, you enter a long-term rental relationship with your landlord. The ground tax rate is not very high and amounts to £50–100 per year. The only exception applies to expensive flats and houses in central London where the tax rate can reach tens of thousands of pounds.

Council Tax

Any occupiers of a UK property, a landlord or a tenant, must pay a council tax that is used to maintain the outside territory and the infrastructure surrounding the real estate. It means that if you rent out a flat or a house, it will be your tenants’ responsibility to make the payments. It substitutes the property tax that is not charged in the UK.

Buying UK Property Off Plan

Buying off-plan means investing in real estate before its construction is complete. In some cases, the construction may not have even been started. There are two completion dates to note when buying off-plan: a short stop date when the developer expects the property to be finished, and a long stop date when it must be finished.

What are the advantages of buying off-plan?

Deposits for unfinished new builds may be cheaper than those on completed properties.
You can often influence design features, fixtures, and fittings.
Purchasing the property at a fixed price before completion means you can benefit from inflation on 100% of its capital value.
There may be discounts available for bulk purchases, which can act as a safeguard against potential market deflation.

In some cases, you may choose to sell the property before it is built. To do this, the contract must be re-assignable. It is recommended to check this before proceeding with a purchase of this nature.

Off-market buying refers to private sales that are not advertised on the open market. We have access to the pool of such options and usually select the most attractive options for our clients.

Purchasing UK Buy-to-Let Property

When you plan to purchase a buy-to-let property, your approach would differ from when you buy a flat or a house for yourself. This is a type of investment as old as the practice of land ownership.

A buy-to-let property can generate a short-term rental income, provided the owner (the landlord) has accounted for all taxes, maintenance costs and mortgage, if any. Should the value of the property go up, the investment can generate capital gains in the mid to long term.

Criteria for UK Buy-to-Let Property

Location
The location will determine how much you can let your property for and how much you will gain if you decide to sell. In the UK, there is an inverse relationship between these two parameters. Investors may choose to focus on an area where real estate prices are rising, but rents remain steady, or the other way around.
Property condition
You can increase the property value through refurbishment or alterations. However, most people prefer to buy a UK property that can be rented out right away.
Mortgage arrangements
Interest rates on buy-to-let mortgages are usually higher. The deposit for a buy-to-let mortgage can vary between 20 and 50%, but the minimum deposit is usually 25%.
Single or multi-unit purchase
In some cases, bulk discounts are available in multi-unit freehold blocks (MUFBs) when investors are looking to buy several properties at once.
Funds liquidity
It might take a while to access the money invested in a property. Besides, you need to objectively assess the liquidity of your purchase: for some flats and houses in the UK, there is a steady demand; others cannot be rented out so quickly and easily at a reasonable price.

Landlord’s Responsibilities

You must understand your rights and responsibilities if you plan to become a landlord. For example, every time you get your rent, you must do the following:

Declare your income;
Pay income tax even if you are a non-UK resident.

Mortgage in the UK

The mortgage rate in the UK is record low starting from 2%. The standard mortgage term is 25 years, but it can be extended to 35 and 40 years.

General Eligibility Requirements

Age – from 18 to 75 years old;
Stable income and regular outgoings to be able to make mortgage repayments;
Borrowed amount is on average up to 80%. In some cases, it can be up to 100%. However, it is better to approach a lender with a deposit in hand. The higher the deposit, the better interest rate you can get.

Mortgage Documents for Foreign Applicants

An ID;
Proof of your current address;
Proof that you have enough finances in your bank account (bank statement etc.);
Proof of your sources of income for the last three months (for example, payslips, dividends, bonuses for the last year, etc.);
Additional documents to confirm your creditworthiness.

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Purchasing UK Property with Imperial & Legal

Purchasing UK Property with Imperial & LegalPurchasing property in London or any other British city is not so difficult. At the same time, there are a lot of things to be aware of. If you are not sure whether you can comprehend all of them, if you want to optimise your taxation and be confident in the condition of the property you purchase, you can contact Imperial & Legal for help.

We are not real estate agents, so we will represent you, the buyer, and not the seller. Our approach is to offer completely unbiased and balanced support to ensure you find and purchase the right property at the right price. We will also advise you on the related taxes and fees and offer cost optimisation solutions.

Imperial & Legal’s specialists have been in real estate for more than 20 years working both in the open and private markets, with well-known real estate agents and private developers alike. The latter usually offer very attractive options.

How We Work

Initial meeting
It is an important first step that enables us to fully understand your requirements and what is important to you. We can also advise you on locations, styles, price per square meter, and current market conditions.
Property criteria
We narrow down search criteria taking into account your requirements and preferences. This is emailed to you so that we are all clear on the initial search criteria.
Property search
We do a thorough market search on your behalf, including properties which aren’t officially on the market. Our network of contacts alerts us of any housing stock, distress and failed sales, auction opportunities, and new builds in advance of agent listings. We then preview the properties which closely match your criteria.
Report to you
Having viewed each property, we shortlist those which best suit your brief and provide you with honest and objective feedback on them.
Viewings with you
Most of our clients choose to view the shortlisted options themselves. We organise viewings at times to suit you. We drive you to all viewings to show you around ourselves and discuss feedback with you afterwards. If you’re not going to be in London, we can organise a virtual tour (via Zoom, Skype, etc.) or show the options to your friend or family member.
Negotiation
When the right property is found, we advise you on its value and negotiation tactics or handle the negotiations on your behalf to secure the lowest possible price. We can also organise an independent inspection of the property to detect all the defects before the purchase and avoid the related additional repair costs.
Overseeing your purchase
Once the price is agreed upon, we manage the buying process on your behalf through to completion, liaising with all parties involved. Our experienced conveyancing solicitors will act in your interests through the whole process, check all documents, and ensure that the process runs as smoothly and quickly as possible.
Settling in
Even after the deal is made, Imperial & Legal remains on hand. We will provide you with a tailored comprehensive relocation package. Our experts will help you not only obtain the required visa but also open a bank account, set up a business, find schools for your children, and optimise taxation.
Property management
If you treat your UK property as an investment or do not plan to live in the purchased flat or house for some time, we can provide you with a full property management service.

FAQ About Purchasing UK Property

What taxes do I have to pay if I rent out a UK property?

According to British law, even if you are not a UK tax resident, you will have to pay taxes on all the income that originates inside the UK. Individuals pay income tax on salary, bonuses, pensions, savings interest, and rental income. The tax rate is progressive and ranges from 0% to 45% with annual indexation. For example, here are the income tax rates for the 2023/2024 tax year:

Income (£)	Tax rate
Up to 12,570	0 %
From 12,571 to 50,270	20%
From 50,271 to 125,140	40%
More than 125,140	45%

What taxes do I have to pay if I sell my UK property?

Apart from an income tax on your rental property, you will have to pay a Capital Gains tax (CGT) if your property value has grown since its acquisition.

CGT is paid after you sell your house or flat. It is the difference between the purchase price and the selling price. Sometimes, you can lower your tax burden by deducting the money you have spent on legal support of the purchase (real estate agents and solicitors) and refurbishment from your gain. You can also get some tax reliefs depending on the tax year. The CGT rates are the following:

18% – gain is less than £37,700;
28% – gain is more than £37,700 (for residential property; 20% – for commercial property).

If you are not a UK tax resident, you will have 30 days to pay a CGT after you sell your property. As a UK tax resident, you will have more time but only till the end of the tax year.

What is the stamp duty land tax rate for companies?

If the property value is more than £500,000, the stamp duty land tax (SDLT) rate for legal entities will be 15%. In some cases, companies are exempt from SDLT. To learn more about the benefits that you can enjoy, contact Imperial & Legal’s experts.

What is a freehold property?

Most foreign nationals who come to the UK do not know that they must pay a ground tax if they own only the property and not the land that it is built on. This type of ownership is called leasehold and means a long-term rent for up to 999 years. As a rule, a leasehold property is cheaper, and the annual rent rarely exceeds £100.

However, if you want to secure a property for good, you should aim at a freehold property when both the building and the land will belong to you.

What will be the stamp duty land tax rate if I purchase my first residential property in Scotland?

Scotland has its own SDLT rates that differ from the British and Irish ones.

Standard SDLT rates for residential properties in Scotland

Property value (£)	SDLT rate
First 145,000	0%
Additional 105,000 (property value from 145,001 to 250,000)	2%
Additional 75,000 (property value from 250,001 to 325,000)	5%
Additional 325,000 (property value from 325,001 to 750,000)	10%
More than 750,000	12%

If you purchase your first property in Scotland, the first £175,000 of the property value will be tax-free.

What is a condominium?

A condominium is a form of property ownership when people who live in a block of flats own only their flats while sharing the ownership of common areas. All the decisions concerning the maintenance of commonhold areas are made during general meetings.

A condominium may include several neighbouring blocks of flats with shared outdoor space.

Can I skip an independent survey?

As it was mentioned above, by UK law, you won’t be able to claim against property defects that you only discovered after the deal is made. To avoid unpleasant surprises and additional costs, it is recommended to contact an experienced surveyor for an independent inspection of your future house or flat.

The inspection will give you an objective look at the condition of the property you plan to buy, maintenance costs, and repair costs. In some cases, based on the estimated required costs, you can get significant discounts on the purchase price. Most importantly, you can avoid a reckless purchase when the attractive price will just hide expensive repairs and maintenance costs.