For sure, at our age, moving to another country is like a natural disaster. But after considering everything, we decided to move closer to Hannah's sister who lives in the UK. It was only later that we realised how many issues we had to handle — selling our old house, purchasing a new one, and dealing with taxes! We had no idea how to do it all properly, so we were grateful that Imperial & Legal assisted us.
Tobias and Hannah moved to the UK from Austria. The couple received a pre-settled status, which is granted to EU citizens, permitting them to relocate to the UK on more flexible terms.
When they decided to move, they were already retired. They wished to live near Hannah’s sister — Agnetha —who lived with her spouse in Devonshire. Agnetha was elderly and required care. Additionally, the sisters could no longer be away from each other; even daily phone calls failed to make up for in-person meetings.
The couple rented a small house initially and planned to stay there for at least a year. Settling in a new city and adjusting to a different way of life at their age wasn’t easy. They were concerned about adaptation, so they decided on a “trial period”. However, they found that the adaptation was smoother than anticipated. There were some difficulties with the language due to the unfamiliar local dialect, but they promptly adjusted. The delight of meeting Agnetha surpassed any difficulties they encountered.
After a year, Tobias and Hannah felt at home in Devonshire and decided to move there permanently, and even looked for a small house. But they had to sell their big house in Austria first. They intended to leave most of the proceeds to their son who did not have a house and keep the rest.
The couple contacted Imperial & Legal for tax planning advice on the sale and purchase of properties. They realised that significant financial transactions require payments to be made to the government. They wanted to make the whole process more efficient and as convenient as possible.
Hannah — 58 years old, Austrian.
Tobias — 62 years old, her husband, also Austrian.
To plan tax strategies for selling a house in Austria and buying one in England.
To determine the best way of handling the couple’s property-related matters, we needed to know our clients’ legal status and the property tax rates in England and Austria.
As with many immigrants in similar situations, Tobias and Hannah were UK tax residents but not domiciled. It meant that they could decide in which country to pay tax on money earned from foreign sources. In our case, this income came from selling an Austrian house.
We investigated the Austrian tax rate for such transactions. It turned out that if the proprietors sell their only home there, they are not required to pay any tax. Tobias and Hannah only had to provide records verifying that they had lived in the country for a minimum of five years in the past ten years. The utility bills during that period were enough, so the problem with sales tax appeared to have been resolved.
However, our advisors have explained that the remittance regime only applies to money that remains outside of Austria. This means that you can legally avoid paying taxes on funds that are kept abroad. It applied to the amount of money the clients wanted to pass on to their son. Money received in or brought into the UK is taxed.
In addition, our advisors informed the couple about stamp duty which buyers of property must pay. Houses worth up to £125,000 and owned solely by the buyer are exempt from the duty. There is a progressive tax increase in line with the value of the house. Houses priced up to £250,000 are taxed at a rate of 2%, those priced up to £295,000 at 5%, and so on.
The couple aimed to purchase a house for no more than £250,000. The upside for them was that they only had to pay 2% of the difference between £125,000 and the final transaction amount, rather than the full cost they had originally anticipated.
Eventually, we decided to assist the clients with their tax returns, since they had to account for not only property transactions but also other financial transactions. The couple were concerned that they would be unable to do this in compliance with the law.
Selling property abroad when you are a UK tax resident does give you some freedom, provided you are not domiciled in the UK and your home country’s capital gains tax rates are more favourable.
The case of our clients shows that there are many factors to consider when planning property transactions, including the transaction’s sum, whether the property is for sole occupancy, how long it has been owned, and other factors. People who don’t understand tax law and accounting sometimes make mistakes leading to extra expenses.
The same is true for buying a house or flat in the UK if you are a resident and non-domiciled at the same time. There are many factors to consider, which only someone who specialises in this area can properly advise on.
Imperial & Legal’s advisors will review your situation, offer you all possible solutions, provide advice as well as help you with your transaction at each stage. Give us a call or drop us an email and we’ll provide the necessary legal advice to help you with your matters.
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