If you’re ready to take the plunge and invest in property investment within the UK, there are a few extra things you need to look into as an overseas investor — before you sign on the dotted line.
First and foremost, when buying property in the UK, you’ll need to understand where best to target, which areas have the strongest demand and why. Remember, this is a business purchase, not an emotional purchase, so a significant level of due diligence and data analytics is required. You’ll have to navigate the UK’s tax rules for non-residents, work with local estate agents, deal with the legal process and requirements around property and home buying process, and understand your financing (mortgage) options. The good news is that the expert team at Baron & Cabot can help you with these tasks and more.
Short Summary
- International investors can legally purchase property in the UK, with options to buy either personally or through a limited company, each with its own tax implications.
- Non-residents must pay SDLT on property purchases, with rates ranging from 0% to 12% based on property value, plus an additional 2% surcharge for non-residents.
- Non-residents can finance their property purchase through UK mortgages, cash payments, or private lenders, though stricter lending criteria apply for foreign buyers.
- Non-residents must comply with legal requirements like proof of funds, and potential taxes like Capital Gains Tax (CGT) and Inheritance Tax (IHT) when buying property in the UK.
At Baron & Cabot, we pride ourselves on conducting all the necessary research for our overseas clients looking to start or expand their real estate investment portfolio in the United Kingdom. This guide will outline some of the things you need to know to successfully buy a property in the UK as an international investor.
We’ve got you covered — from finding the right investment property in the right area to helping you get it through legally and securely, to stamp duty, land registry, securing a mortgage, and protecting your investment while ensuring your asset is managed and tenanted.
Read on to learn how to avoid costly mistakes and set yourself up for success as a property owner in the UK.
Can Non-Residents Buy Property in the UK? (Summary)
In short, yes.
As a non-UK resident buying property in the UK, you’ll be pleased to know that non-residents are permitted to purchase property in the UK.
There are two popular ways an international investor can purchase property in the UK. You can either make a personal purchase in your name (or your partner’s) or buy as a limited UK company.
Both have various advantages and possible disadvantages; however, it all depends on your individual circumstances, plans and goals. Gain insights from UK property investment experts to determine the best possible path for you and how you’re being taxed. It’s also much easier to go through investment specialists like Baron & Cabot; we’re experts in the UK real estate market and have specialist knowledge on the local economy, helping you invest your money to gain the best returns at a fraction of the cost — and time.
When investing in UK real estate as a non-UK resident, it’s essential to make sure you understand both the regulations and the costs involved. Nonetheless, with the proper knowledge and preparation, purchasing UK property can be a lucrative investment for overseas buyers. The key resides in finding an experienced team to guide you through the process — say hello to Baron & Cabot.
Stamp Duty Land Tax Rates for Foreign Buyers
As with UK residents, foreign investors buying property in the UK will be subject to Stamp Duty Land Tax (SDLT) rates. SDLT is a tax levied on purchasing properties over a certain price threshold. The rates vary depending on the property value and whether you purchase individually or through a company, as we’ll see below.
SDLT Rates for Individuals
If you’re purchasing a residential property in your name as an individual, the current SDLT rates are as follows:
- Up to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Over £1.5 million: 12%
These rates apply whether you intend to let out the property or live in it. However, in addition to the 3% surcharge paid if you’re obtaining additional residential property, non-residents are taxed an extra 2% surcharge if purchasing a residential property in Northern Ireland or England.
SDLT Rates for Companies
If buying property through a limited company, the higher SDLT rates apply (i.e., a 3% surcharge) but are capped at 15% for properties worth over £500,000. These rates apply regardless of whether the property will be used for residential or commercial purposes.
Additional Costs
In addition to SDLT, UK residents and foreign buyers can expect to pay other fees, such as legal fees, surveys, and mortgage costs. Investigating all additional expenses is essential to determine if the investment is financially viable and aligns with your objectives.
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At Baron & Cabot, our team of property investment specialists can walk you through the buying process, guide you on legal and tax implications, and help you with house hunting to find investment properties that match your financial goals. We handle the due diligence to ensure foreigners buying property in the UK get a sound and simplified home-buying process.
We also supply all our clients with a cash flow which details figures, costs and profits involved prior to purchasing the property. We like to be transparent with our clients and provide them with all the necessary information prior to their investment.
Legal Requirements and Restrictions
As a non-UK resident buying property in the UK, you must be aware of several legal requirements and restrictions before purchasing property in the country.
Let’s look through the prominent ones below.
Obtaining a Visa
You neither need to obtain a Visa nor be in the UK when purchasing a property. By utilising the skills and experience of an investment specialist such as Baron & Cabot and its team, this won’t be necessary to invest in UK properties. However, you must obtain an Investor Visa if you’re physically moving to the UK, investing a substantial amount, or have other reasons requiring a visa.
The most common visas for property investors are as follows:
- Tier 1 Investor Visa: For investing £2 million or more in UK government bonds, share or loan capital in UK companies.
- Tier 2 General Visa: For company directors, entrepreneurs, and investors. This requires a UK-based sponsoring employer.
The application process can take 3 to 4 months, so endeavour to plan ahead. You’ll also need to provide proof of funds and a credible investment plan.
Setting Up a UK Company
Many buyers making foreign investments in UK property purchase property through a UK-based company to reduce their tax burden and liabilities. If you aren’t using UK property investment experts, this is the most common route to take, and your company structure can be any of the following:
- Limited Company: Offers limited personal liability, but profits are subject to corporation tax. It also requires annual filings and accounting.
- Limited Liability Partnership: Similar to a limited company but with more flexibility. It’s well suited for joint investments.
- Non-Resident Landlord Scheme: Allows non-resident individuals to receive UK rental income with basic tax deducted at source — simple but limited tax benefits.
No Restrictions on Type of Property
As a non-resident, you’re encouraged to buy any type of property you desire in the UK. As with residents and UK citizens, you can buy residential property as a second home or a buy-to-let (the most common). You can also buy commercial properties like retail, office, industrial, etc. — no restrictions.
However, note that you must register with the HMRC once you start accepting rent on your rental properties.
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You can successfully invest in UK real estate by understanding the legal landscape and working with a reputable property investment firm like Baron & Cabot. But do your due diligence — the rules are complex, with severe penalties for non-compliance.
3 Financing Options for Overseas Buyers
When it comes to buying property in the UK, you can just pay for the asset to own it. However, you’ll sometimes need an advance to augment your current savings if it can’t cover the property cost.
Here are three viable options:
- Mortgages
- Cash buyers
- Private lenders and specialist brokers
1. Mortgages
As an overseas buyer, you have several options for financing your UK property purchase, the most common of which is obtaining a mortgage from a UK bank or lender. Many banks in the UK offer mortgages for non-resident buyers, though you may face higher interest rates and fees than residents. You’ll also need a larger down payment, typically 25%–35% of the purchase price. But investing in a stable property market like that of the UK brings benefits which outweigh the costs, making your investment worth it.
It’s worth mentioning that the lending criteria tend to be more stringent for non-residents, and they include the following:
- Provide proof of income and assets from your home country. This shows you can afford the monthly mortgage payments even if you don’t earn income in the UK.
- Have a good credit score in your home country. UK mortgage lenders will consider your credit history from major credit bureaus.
- Be prepared to pay higher interest rates for a first-time buyer. The rates will depend on your loan-to-value ratio, credit profile, and property type. These will improve as your financial footprint and credit file in the UK gains momentum.
- Most mortgages for non-residents can be long-term or short-term.
However, once you have met the UK requirements, Baron & Cabot will take care of the rest of the mortgage deal, allow you to step back, and know you’re in trustworthy hands.
2. Cash Buyers
If you have the funds, buying the property outright in cash can be simpler. You avoid the hassle of applying for a mortgage and paying interest and fees. Property prices in the UK are high compared to less economically developed countries (as are the gains from your investment), so you need substantial cash reserves.
3. Private Lenders and Specialist Brokers
At Baron & Cabot, we work with private lenders and specialist mortgage brokers that focus specifically on mortgages for native and overseas buyers and may offer more competitive rates and terms than mainstream banks. The rates may be slightly higher for first-time buyers, but they understand the unique needs of non-resident buyers and have more flexibility in their lending criteria.
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In summary, while obtaining financing as an overseas buyer may be challenging, there are several options to aid you in this process. Do your research, evaluate the pros and cons of each option for your situation, and work with lenders specialising in non-resident mortgages. With the right financing, you can join the many foreigners who successfully invest in UK property. Here at Baron & Cabot, we can assist with this.
5 Steps to Buying UK Property as a Non-Resident
As a non-UK resident buying UK property, the property purchasing process will differ slightly for residents.
Here’s an outline of the five critical steps in the property-buying process:
- Finding a property
- Instructing a solicitor
- Applying for a mortgage
- Exchanging contracts
- Completion
Step #1: Finding a Property
The first step is the property search. You must find a property you’re interested in. When you work with an expert such as Baron & Cabot, they can help you view properties that match your needs. They can also advise you on the local area and factors like rental demand, capital growth, transport links, schools, and amenities.
Step #2: Instructing a Solicitor
You’ll need to hire a solicitor or conveyancer to handle the legal aspects of your purchase. They’ll conduct searches to check for any issues with the property as well as handle the contracts and paperwork, including the land registry. Make sure you hire a solicitor familiar with non-resident transactions, as there are additional legal considerations like Capital Gains Tax for non-residents. Here at Baron & Cabot, we only deal with regulated (SRA) UK lawyers/solicitors and can help you with all of this.
Step #3: Applying for a Mortgage
You must apply with a non-resident mortgage lender and submit a mortgage application if you’re not fully financing the property purchase and want to borrow money. To do this, you’ll have to provide documents to verify your income and financial status. Again, here at Baron & Cabot, we can help you with this.
Step #4: Exchanging Contracts
Once all paperwork is finalised, you can exchange contracts, and you legally commit to the purchase. After the exchange of contracts, you’ll transfer a deposit, typically 20% of the purchase price, to the seller. This is all done legally, safely and securely via your UK lawyer/solicitor.
Step #5: Completion
On the completion date, the remaining funds are transferred, keys are released, and the property is officially yours. You can now make arrangements to let out your UK property. Baron & Cabot’s sister company can assist you with that. Help manage the property and the tenants.
The buying process typically takes a few days to a few months. However, the expert team at Baron & Cabot is dedicated to handling the bulk of the process on your behalf and providing professional guidance where necessary. When you partner with us, you can be confident of joining the ranks of international property owners in the UK in the shortest time possible.
3 Tips for Negotiating an Offer as a Non-Resident Buyer
As a non-resident buyer, working out an offer on a UK property requires extra consideration, and we’re dedicated to helping you navigate this stage at Baron & Cabot. However, if you decide to embark on this process on your own, here are five helpful tips to ensure you get the best deals for your money:
- Do your research.
- Consider exchange rates.
- Be prepared to move quickly.
Tip #1: Do your research.
Learn as much as you can about the local property market and prices in the area you’re interested in. Check recent selling prices of comparable properties to determine a fair offer price range. Know the details of the specific property so you can make an informed offer.
An excellent place to start when considering buying property in the UK is our insights on UK properties.
Tip #2: Consider exchange rates.
If you’re buying in pounds, but your income is in another currency, fluctuations in the exchange rate could impact your buying power. Ensure your offer still works, even when the exchange rate is less favourable. You may want to involve a currency specialist to help you manage the risk.
Tip #3: Be prepared to move quickly.
The UK property market moves fast. As a non-resident buyer, you may lose out on some deals since you can’t view properties on short notice — a key area where Baron & Cabot can help. Be ready to make a quick decision if a good opportunity comes up. Have your financing in place and know your maximum offer price beforehand.
Frequently Asked Questions on Buying a Property in the UK
Do I need to be a UK resident to buy a property?
No, you don’t need to be a UK resident or citizen to purchase property in the UK. However, you’ll need to set up a UK bank account.
Does buying a house in the UK give you residency?
No. The UK doesn’t offer any residency by investment scheme. However, the Investor Visa is a means of obtaining UK residency.
Is buying UK property a good investment?
UK real estate can be an attractive investment for the right property in a desirable location. Property values in the UK have steadily increased over the long term. Rental yields are also relatively stable, currently averaging around 5%.
Key things to consider when purchasing a UK property are the strength and stability of the local economy, infrastructure developments, and availability of jobs. Popular cities for investment include London, Manchester, and Birmingham.
How much are property taxes in the UK?
A foreign buyer, just like a UK resident, must pay stamp duty land tax (SDLT) when purchasing a property over a certain price threshold. Depending on the property value, SDLT rates range from 0% to 12% of the purchase price.
Conclusion
In summary, there are several factors to consider before buying a property in the UK as an overseas investor, and this guide has outlined the most important ones. While the legal and tax requirements may seem daunting, many foreigners have successfully navigated the process. The key to this is to do your homework, find experienced professionals like Baron & Cabot to guide you, and take it step by step.
Buying a home in Great Britain can be very rewarding if you go in with realistic expectations about the challenges. You’ll have an asset that provides rental income, holds value well over time whilst appreciating capital and gives you a foothold in one of the most desirable countries to visit or live in.
And what better companion to have for this journey than Baron & Cabot?
Contact us now to get started.
Disclaimer: Any information provided by Baron & Cabot does not constitute financial advice and is for educational purposes only.
