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New tax to hamper overseas investment in UK property?

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A new UK regulation aims to impose on overseas buyers the same tax responsibilities that local property owners have, which could affect property investment in the region.

At the end of November, the UK government announced that from April 2015, the Capital Gains Tax (CGT) will also apply to non-resident owners of UK property who live overseas. These investors will therefore pay a CGT of either 18 per cent or 28 per cent on any gains they make after April next year once they sell their property. The tax rate will depend on a variety of factors, such as income level.

The only way for an investor to get around the tax would be to spend at least 90 days residing at the property during the tax year, which would make them eligible for principal residence relief. It's also important to note that the CGT only applies to residential property, so commercial investors will not be affected.

"The new rules are not quite as draconian as some expected," said Charles Hutton, a partner at UK law firm Charles Russell Speechlys.

"But it is more important than ever that overseas buyers carefully consider the best way of structuring their purchases of UK property."

With this new tax coming into effect in only a few months' time, investors with their eye on property in the UK will need to review their strategies - with the introduction of a substantial tax no doubt having implications on their investment appraisals.

There are solutions available to make the process easier and more manageable, however. Property valuation software, for instance, can help buyers make better financial sense of their investment targets and develop a well-advised plan.

Date Published: 02 Dec 2014
Category: News

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