By and large, it hasn’t been a particularly happy new year for UK buy to let investors, after George Osborne slipped a large stamp duty hike into landlords’ Christmas stockings. ‘Bye bye buy to let’ headlines have dominated January newspapers but, as ever, journalists have been a little too quick to sound the death knell of the sector. UK buy to let hasn’t completely lost its shine yet – particularly for ex pat investors. Stock markets the world over are fickle friends at the moment, and UK property remains a better bet.
Anyone invested in the FTSE, the Dow Jones or the Dax will have seen, at best, static returns over the past year, and in many cases a fall. UK property, by contrast, is continuing full steam ahead; London prices have risen by up to 22% over the last 12 months. As an investment prospect for someone living overseas it remains extremely attractive, especially considering the current competitive interest rates on expat mortgages. Lenders pushing to get their noses in front in a crowded market are offering rates as low as 3.53% on some of their products.
A whip-around of leading property experts reveals a prevailing optimism. Reuters, BNP Paribas, the Royal Institute of Chartered Surveyors and the Centre for Economic and Business research are all predicting a strong year for expat UK buy to let investors. Property prices are expected to grow by 3.5% – 6% and, combined with a typical rental yield of 4% – 6%, total returns should be around the 10% mark. ‘The market is on course to perform well again, and should deliver some enticing results,’ says Islay Robinson, CEO of Enness Private Clients.
Of course, there are still a lot of changes to take on board. The stamp duty changes which have proved so controversial will affect overseas investors, as will the alterations to capital gains tax.
There are plenty of positives, however. Money spent on repairs to properties is still tax deductible against profits, and ex pat buy to let mortgage holders will also continue to be able to offset 100% of mortgage interest costs against rental income – only paying income tax at the standard rate (currently starting at 20%). A personal tax free allowance of £10,800, for the tax year starting April 2016, is also still available for ex pat landlords to benefit from.
With regards to capital gains tax, again, it isn’t all doom and gloom. UK property not designated as the main family home will be subject to capital gains tax going forward, but a tax-free capital gains tax allowance is still available to investors –worth £11,100 this tax year.
Our best advice? It is more important than ever to keep proper records – and to seek proper advice on ways to mitigate your tax liability. An expert will be able to help you arrange your finances in the most efficient way possible, while keeping well within the rules.
If you are an expat interested in dipping your toe into UK buy to let – or have any questions about this article – please do get in touch. Our specialist mortgage advisers are on hand to talk through your options with you by phone, email or in person whenever suits you.