Can Foreigners Buy Property in UK Areas? - Your Questions Answered in 2024 (2024)

Foreigners can legally buy property in the UK, regardless of if they are a resident or not.

Foreigners buying property in UK locations can even secure a UK mortgage but may encounter more requirements, higher interest rates, and larger deposits if they have less than two years of residency in the UK.

Can Foreigners Buy Property in the UK Without a Visa?

Yes, non-UK residents can buy property in the UK without a visa. However, if you want to invest £2 million or more in the UK, you may apply for a Tier 1 (Investor) visa.

To beeligible for a Tier 1 (Investor) visa, you must:

• Be 18 or over.
• Be able to prove the money belongs to you or your partner.
• Have opened an account at a UK-regulated bank.

The visa allows you to stay for three years and four months, which can be extended and allows your ‘dependents’ to come on the same visa.

Your Questions Answered with our free resources.

Yes, foreigners can buy a property in the UK on a mortgage, but you may encounter some issues.

This is because many UK lenders will not be willing to lend to a non-UK resident, which means you will have fewer options available or encounter higher interest fees or larger deposits.

To avoid this, you can use the services of specialist lenders or international banks to get help securing a UK mortgage for residential property. Keep in mind, though, that these organisations will consider whether to lend based on various factors, including age, income, and credit score.

When buying property, checks will be made to comply with money laundering and fraud laws. These checks will typically be conducted by solicitors, banks, and property agents.

As such, you’ll need some documentation to prove you are who you say you are.

The documentation you need to buy a house in UK countries includes:

• Proof of identity– this includes a driving license or passport.
• Proof of address– typically via a bank statement, utility bill, or driving license.
• Source of funding– to show where your money comes from, you’ll need to show a payslip or tax return.

You could be asked for these documents at any stage, so be sure to have them ready when called upon to make the process as smooth as possible.

So what foreign property taxes should you know about? By purchasing property in the UK or renting it out, you’ll be subjected to various taxes. This can include Income Tax, Capital Gains Tax, Stamp Duty Land Tax, and Inheritance Tax.

Income Tax for Foreign Buyers

In the UK, the money you earn from rental income is taxable.

If you’re a non-UK resident, you’ll only be taxed on your UK income, not the income you earn elsewhere. Even if you’re classed as a UK resident for tax purposes, if you spend six months or more abroad, you’ll be classed as a “non-resident landlord.”

You can choose to pay tax on your income in two ways.

1. You can earn your rental income in full and then pay tax through aself-assessment tax return.
2. You can allow your lettings agent or tenant to deduct the tax automatically.

To take the first option and fill out a self-assessment tax return, you’ll need to apply. You can do so by filling outform NRL1iand sending it to HMRC.

If successful in your application, HMRC will then inform your tenant or letting agent not to deduct tax from your rent.

To get your rent automatically tax deducted, your lettings agent or tenant will deduct tax from the rent at a basic rate (20%) after allowing for any expenses. They will then give you a certificate at the end of the tax year to show how much tax has been deducted.

Stamp Duty Land Tax for Foreign Buyers

When buying property in England and Northern Ireland, you are subject to stamp duty land tax.

This is a tax paid on the purchase price of a property.

A similar system is in place in Scotland and Wales, but the tax has a different name and is paid at a different rate than SDLT. You can learn more by checking out our full guide toStamp Duty in 2024.

If you’re buying a second property that is not your home, you will be subjected to an additional 3% charge on top of standard stamp duty rates.

However, as a foreign buyer, you’ll also pay an additional 2% surcharge.

This applies to all non-resident transactions, even if you intend to live in the property, regardless of whether you already own a residential property.

You must pay the surcharge when you buy a residential property for £40,000 or higher.

See below for the latest stamp duty land tax rates for foreign buyers in 2024:

SDLT Example for Overseas Landlords

Let’s say you’re a foreign buyer purchasing a UK buy-to-let property in 2024 for £350,000.

You will pay a 2% charge on the first £250,000 and a 7% charge on the remaining £100,000.

This will leave you with a stamp duty tax bill of £12,000.

You’ll then have 14 days to file a stamp duty return and pay the stamp duty fee.

In the UK, those who make a profit from selling property are subject to capital gains tax. This tax is only applied to the profit earned after selling your asset.

The amount of tax you pay will depend on the level of profit earned, among other factors that will be addressed later.

Non-UK residents are subject tonon-resident capital gains tax, which you’ll pay if you’re a:

• Non-UK resident.
• Representative of a non-resident who has died.
• Non-resident who is a partner in a partnership.
• Non-resident trustee.

From 2019, this tax is payable for both the direct and indirect disposal of UK property or land.

You have 60 days from the date of conveyancein order topay CGT.

The amount of tax paid will also depend on whether you’re an individual, company, or trust and what type of property you’re selling.

• A non-resident individual will pay 10 or 20% tax if it is a non-residential property. For residential property, you will pay 18% or 28% CGT.
• A non-resident company will pay a flat corporation tax of 17%.
• A non-residential trust will pay a 20% tax on non-residential property. If it’s a residential property, a trust will pay 28% CGT.

UK Inheritance Tax for Foreign Buyers

Another UK tax you need to consider is the potential UK inheritance tax on UK residential properties.

The set rate for inheritance tax in the UK is 40%, with the tax only applied to properties worth over £325,000. Even in this case, the tax will only be applied to the money that falls above this threshold.

For example, if the inherited property is £500,000, IHT only applies to £175,000 of the total cash amount.

There are ways you can mitigate and minimise inheritance tax, so be sure to speak to an expert financial advisor for more details.

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There are many reasons the UK is seen as an ideal place to buy a property compared to other nations.

1. Considerable Capital Growth With Growing House Prices

Investors stand to earn significant capital growth in the UK thanks to considerable property price growth in 2024.

Back in 2021, the UK experienced a record-breaking year that sawhouse prices rise to £254,822 on average in December 2021according to Nationwide – the highest ever amount.

Prices grew so fast in 2021, in fact, that Nationwide recorded the highest growth in 15 years.

Factoring in further growth predictions and it’s clear that investors can expect huge returns on their investments in the coming years.

Savills has also predicted that UK prices could climb as high as 11.7% in the North West and Yorkshire and The Humber by 2027.

2. Rising Rent and Rental Yields

Alongside a thriving property market, the UK rental market is also seeing incredible growth.

According to the HomeLet Rental Index, the average UK rent reached £1,199 in April 2023 – up 9.9% compared to last year.

This has led to some astounding rental yields in the UK, with the likes of Liverpool and Manchester known to generate returns of over 7% in certain postcodes.

These yields are far higher than other countries in the world, with popular spots like Shanghai generating an average rental yield of just 2 – 4%.

With so many opportunities to make high rental returns in cities like Liverpool, it comes as no surprise that buying property in the UK as a non-resident is an increasingly attractive venture.

In a report by Savills, it was found that in the wake of the Covid-19 pandemic, more people are reconsidering what they want from a home and are choosing to rent before committing to a property purchase.

With further tenant demand and already high rental yield figures, the future of the UK rental market certainly looks bright for both local and foreign investment in the UK property market, and focusing on high-yielding areas like Liverpool is one of the best real estate investment tips to consider.

Likely the biggest decision you will have to make when choosing to make a buy-to-let investment is deciding what type of property you should pick.

There are currently several types of buy-to-let properties you can buy, including commercial property, holiday homes, and hotel room investments.

However, for our money, the best way to invest in UK property at the moment is through UK residential property and student property, thanks to huge capital growth potential and rental returns.

But which option should you take?

Well, it really depends on your goals and available finances.

Residential property offers far higher capital growth potential but is available at a premium for overseas investors, with the average UK residential property valued at over £250k.

Student property, on the other hand, can be found for less than £100k and will generate far higher rental returns because of this. This will especially be of note if you’re buying a student property on behalf of a family member/ child.

You can learn more about thebest property investment strategies in 2024 by checking out our guide. You can also read about UK student property investment on our blog.

If you’re a foreign investor and don’t have the cash available to buy a UK property outright, you may be wondering how much it costs to buy a UK property when factoring in mortgage deposits.

A buy to let mortgage deposit is usually around 25%, with a buyer also needing to cover stamp duty land tax, legal fees, and land registry fees.

This means for a UK property worth £100,000 – likely the lowest you’ll find – overseas buyers can expect to pay an estimated upfront cost of around£31,200. This is without factoring in other potential expenses like a property survey and higher deposits charged by mortgage lenders if you’re an overseas buyer.

You’ll also need to consider the running costs of owning and managing a rental property as a property investor.

This can include:

• Mortgage payments
• Ground rent
• Property management fees
• Maintenance costs
• Landlord insurance
• Income tax

Learn more by speaking to an advisor or reading our full guide onhow much money you need to invest in UK property.

There are currently a few standout locations you should consider when making a UK property investment.

Likely the top locations for both residential and student property is inNorth Westlocations like Liverpool and Manchester.

Both cities have affordable property prices over £60k below the UK average, with each city known to generate gross returns upwards of 8%

They also have huge young populations, with a combined 170,000 students – a key factor behind a successful rental market.

Factoring in that the North West has the joint-highest growth predictions in the UK, and it’s clear that the region can generate massive returns in 2023.

To learn more about each city, check out our guides toLiverpool property investmentandManchester property investment. You can also read our blog post on the top 10 best places to invest in UK property in 2024 and our guide on how to find a good rental yield.