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Old Sep 27th 2017, 1:26 pm   #1
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Default As a non resident is it a smart move to purchase UK property now

Hello everyone,

Apologies if this is the wrong board but as my question is more uk centric as opposed to where I'm currently living it seems the best choice.

I'm from Manchester but now am resident in Japan (+10 years). My father (another non resident) and I are thinking about buying a property in cash between us back in Manchester (I still visit Manchester on a yearly basis)

We intend to rent the property out using a letting agent. We intend to keep hold of the house for the long term and I may in many years to come return to live in it.

However, Ive been learning how the government has started to make it less appealing for non residents to purchase residential property and not sure if this is a wise decision.

I know of the CGT 2015 rule change for non residents. Not done my maths yet on how that would impact us but since we dont have any UK sourced income it might not be so bad.

Apart from that are there any other things we should be aware of? Is buying a good idea as a non resident?
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Old Sep 27th 2017, 3:22 pm   #2
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Default Re: As a non resident is it a smart move to purchase UK property now

We had two properties on rent while we were non residents. We were very glad we did that as we now live in one and the other provides some income for us to live off. We have no regrets. We had a good agent which is important. You would probably have to pay higher fees for a well known agent but it is worth it. I have watched too many programs on landlords/tenants to risk using a smaller agency unless it comes well recommended. I can’t really say whether it is a good idea to buy now, given the unknown effects of Brexit but, depending on the area, hopefully the housing market will not go down too much.
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Old Sep 28th 2017, 1:01 pm   #3
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Default Re: As a non resident is it a smart move to purchase UK property now

Hello adamyokohama,

Following the changes to capital gains for UK Non-residents, a UK Non-resident owner who makes a disposal of a UK residential property is now required to file a Non-resident Capital Gains Tax Return (NRCGT) to HMRC with effect from the 2015/16 tax year.

The NRCGT is in addition to the annual Self Assessment Tax Return (SATR) with the deadline to file this being within 30 days of conveyance.

If the disposal is not reported within 30 days a late filing penalty will be issued and deferment of the payment of any capital gains tax due may not be granted and may become immediately payable.

If the interest in the residential property was held jointly, each individual must file a NRCGT separately notifying their own share.

The above also applies even if you have disposed of only part of an interest in a UK residential property and also if you are now UK resident but disposal took place in the overseas part of a split year.

Also, with effect from the current tax year (2017/18) HMRC will be restricting deductions from rental property income in relation to mortgage interest as follows:

2017/18 - 75%
2018/19 - 50%
2019/20 - 25%
2020/21 - 0% and beyond

The above will obviously also have a significant impact on rental profits and resulting tax liability.
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Old Nov 3rd 2017, 8:34 pm   #4
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Default Re: As a non resident is it a smart move to purchase UK property now

With Brexit making the whole UK economy unsure it may be best to wait until property prices come down, the pound comes down and see what the eventual outcome will be.
UK property has started to drop in some areas, such as SE, but this could spread to the rest of the country next year.
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Old Nov 4th 2017, 12:21 am   #5
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Default Re: As a non resident is it a smart move to purchase UK property now

Also with interest rates going up this week, maybe the market will change.
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Old Nov 4th 2017, 8:34 am   #6
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Default Re: As a non resident is it a smart move to purchase UK property now

Don't forget that interest rates are only going back to what they were pre-Brexit vote in 2016. They dropped them for a while after the vote. If you are in it for the long haul, you will not go wrong with property in the UK. Just remember, the most important thing is what the real estate agents say - location, location, location.

The taxes are inevitable but you will find these apply in most countries and are always subject to change.

Last edited by Johnboyuk; Nov 4th 2017 at 8:38 am.
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Old Nov 4th 2017, 9:24 am   #7
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Default Re: As a non resident is it a smart move to purchase UK property now

Quote:
Originally Posted by TopNik View Post
Hello adamyokohama,

Following the changes to capital gains for UK Non-residents, a UK Non-resident owner who makes a disposal of a UK residential property is now required to file a Non-resident Capital Gains Tax Return (NRCGT) to HMRC with effect from the 2015/16 tax year.

The NRCGT is in addition to the annual Self Assessment Tax Return (SATR) with the deadline to file this being within 30 days of conveyance.

If the disposal is not reported within 30 days a late filing penalty will be issued and deferment of the payment of any capital gains tax due may not be granted and may become immediately payable.

If the interest in the residential property was held jointly, each individual must file a NRCGT separately notifying their own share.

The above also applies even if you have disposed of only part of an interest in a UK residential property and also if you are now UK resident but disposal took place in the overseas part of a split year.

Also, with effect from the current tax year (2017/18) HMRC will be restricting deductions from rental property income in relation to mortgage interest as follows:

2017/18 - 75%
2018/19 - 50%
2019/20 - 25%
2020/21 - 0% and beyond

The above will obviously also have a significant impact on rental profits and resulting tax liability.
Good, well detailed advice. I am in a similar situation and was unaware of what you have described.
As the OP is looking at keeping the property long term, and possibly eventually live in it when he returns, this may not affect him - or there may be even more strict rules by then!
There is certainly a move towards making life harder for expats in situations like this.
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Old Nov 4th 2017, 9:32 am   #8
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Default Re: As a non resident is it a smart move to purchase UK property now

My area of property investment is Liverpool. Some thoughts:

I'd only invest as an expat if I knew the area and the property market very well. As you're from Manchester that's probably not an issue for you. One thing I always do before buying a property is walk the streets and chat with residents and businesses. It's remarkable how much info you can pick up!

As well as an excellent letting agent, you'd need to build a small team of maintenance contractors that you know will do good work for a fair price. Many (most?) letting agents have their own contractors but charge a premium to arrange the works. Also, you don't have any control over the price if you use the agent's contractors.

If you're not already across the huge raft of legislation governing landlords' legal responsibilities, get up to speed. There are many websites to help you with this, I use Property Tribes. I can't stress enough the importance of this. Even if you employ an agent to manage your property, you remain responsible for ensuring all legislation is complied with.

Landlord licencing by local councils is becoming common. This requires a landlord to demonstrate that they're a 'fit and proper' person to own rental property. I pay £500 per property for my licences (yep, you have to get a licence for each property), the licence lasts for 3 years and must then be renewed. Tip - if you become a member of an accredited landlord association such as the Residential Landlords Association or the National Landlords Association, councils often provide a 50% discount. It's well worth the membership fee.

Be aware of the Energy Performance Certificate requirements that are being rolled out, which require landlords of less energy efficient properties to bring them up to standard (easily Googled).

While the London and South East bubble is suffering a bit of deflation, property prices in the North West seem relatively stable. Prices in many areas have yet to recover from the global financial crash and I don't believe we'll see significant drops in prices in the short/medium term.

Decide whether you're most interested in yield or capital appreciation. Your yield on investment (net rental return on what you spent on the property, fees, management costs, plus a contingency fund for voids and maintenance) will often be smaller in a really good area, but your property will appreciate in value, whereas you mightn't see much capital growth in a less desirable area but you'll get a good yield.

Look after your tenants, or in your case, make sure your letting agent looks after them!

Just some thoughts off the top of my head, hope it helps.
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Old Nov 4th 2017, 9:36 am   #9
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Default Re: As a non resident is it a smart move to purchase UK property now

Quote:
Originally Posted by spouse of scouse View Post
My area of property investment is Liverpool. Some thoughts:

I'd only invest as an expat if I knew the area and the property market very well. As you're from Manchester that's probably not an issue for you. One thing I always do before buying a property is walk the streets and chat with residents and businesses. It's remarkable how much info you can pick up!

As well as an excellent letting agent, you'd need to build a small team of maintenance contractors that you know will do good work for a fair price. Many (most?) letting agents have their own contractors but charge a premium to arrange the works. Also, you don't have any control over the price if you use the agent's contractors.

If you're not already across the huge raft of legislation governing landlords' legal responsibilities, get up to speed. There are many websites to help you with this, I use Property Tribes. I can't stress enough the importance of this. Even if you employ an agent to manage your property, you remain responsible for ensuring all legislation is complied with.

Landlord licencing by local councils is becoming common. This requires a landlord to demonstrate that they're a 'fit and proper' person to own rental property. I pay £500 per property for my licences (yep, you have to get a licence for each property), the licence lasts for 3 years and must then be renewed. Tip - if you become a member of an accredited landlord association such as the Residential Landlords Association or the National Landlords Association, councils often provide a 50% discount. It's well worth the membership fee.

Be aware of the Energy Performance Certificate requirements that are being rolled out, which require landlords of less energy efficient properties to bring them up to standard (easily Googled).

While the London and South East bubble is suffering a bit of deflation, property prices in the North West seem relatively stable. Prices in many areas have yet to recover from the global financial crash and I don't believe we'll see significant drops in prices in the short/medium term.

Decide whether you're most interested in yield or capital appreciation. Your yield on investment (net rental return on what you spent on the property, fees, management costs, plus a contingency fund for voids and maintenance) will often be smaller in a really good area, but your property will appreciate in value, whereas you mightn't see much capital growth in a less desirable area but you'll get a good yield.

Look after your tenants, or in your case, make sure your letting agent looks after them!

Just some thoughts off the top of my head, hope it helps.
Excellent post!
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Old Nov 4th 2017, 12:09 pm   #10
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Default Re: As a non resident is it a smart move to purchase UK property now

Quote:
Originally Posted by spouse of scouse View Post
My area of property investment is Liverpool. Some thoughts:

I'd only invest as an expat if I knew the area and the property market very well. As you're from Manchester that's probably not an issue for you. One thing I always do before buying a property is walk the streets and chat with residents and businesses. It's remarkable how much info you can pick up!

As well as an excellent letting agent, you'd need to build a small team of maintenance contractors that you know will do good work for a fair price. Many (most?) letting agents have their own contractors but charge a premium to arrange the works. Also, you don't have any control over the price if you use the agent's contractors.

If you're not already across the huge raft of legislation governing landlords' legal responsibilities, get up to speed. There are many websites to help you with this, I use Property Tribes. I can't stress enough the importance of this. Even if you employ an agent to manage your property, you remain responsible for ensuring all legislation is complied with.

Landlord licencing by local councils is becoming common. This requires a landlord to demonstrate that they're a 'fit and proper' person to own rental property. I pay £500 per property for my licences (yep, you have to get a licence for each property), the licence lasts for 3 years and must then be renewed. Tip - if you become a member of an accredited landlord association such as the Residential Landlords Association or the National Landlords Association, councils often provide a 50% discount. It's well worth the membership fee.

Be aware of the Energy Performance Certificate requirements that are being rolled out, which require landlords of less energy efficient properties to bring them up to standard (easily Googled).

While the London and South East bubble is suffering a bit of deflation, property prices in the North West seem relatively stable. Prices in many areas have yet to recover from the global financial crash and I don't believe we'll see significant drops in prices in the short/medium term.

Decide whether you're most interested in yield or capital appreciation. Your yield on investment (net rental return on what you spent on the property, fees, management costs, plus a contingency fund for voids and maintenance) will often be smaller in a really good area, but your property will appreciate in value, whereas you mightn't see much capital growth in a less desirable area but you'll get a good yield.

Look after your tenants, or in your case, make sure your letting agent looks after them!

Just some thoughts off the top of my head, hope it helps.
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Old Nov 5th 2017, 5:15 am   #11
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Default Re: As a non resident is it a smart move to purchase UK property now

Quote:
Originally Posted by Victor Meldrew View Post
Good, well detailed advice. I am in a similar situation and was unaware of what you have described.
HM Land Registry are notified of the sale of UK Property and unfortunately many are not aware of the Non-resident Capital Gains Tax Return (NRCGT) until it is too late. The fines issued by HMRC can be very harsh.
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Last edited by TopNik; Nov 5th 2017 at 5:18 am.
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Old Nov 5th 2017, 7:41 am   #12
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Default Re: As a non resident is it a smart move to purchase UK property now

Something else to be aware of if you are buying a flats or HMO type housing. There are may houses that have been converted into multiple flats or self contained units. Some of those properties still only have one council tax bill, however if the council finds out it is multiple units they will charge council tax on each unit.
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Old Nov 5th 2017, 9:03 am   #13
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Default Re: As a non resident is it a smart move to purchase UK property now

If you have a private property that you rent out whilst you are posted overseas do you have to get a license from the council first?
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Old Nov 5th 2017, 9:48 am   #14
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Default Re: As a non resident is it a smart move to purchase UK property now

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If you have a private property that you rent out whilst you are posted overseas do you have to get a license from the council first?
In the case of England, it depends if the Council has a selective licencing scheme. Not all do, but they're becoming more common. They generate a good bit of cash so I think we'll see it everywhere in the not too distant future.

Although I'm a landlord I'm in favour of selective licencing. It helps to get rid of landlords who rent out substandard property and don't give a damn that their tenants are living in damp, infested, dangerous conditions.

Licencing is mandatory everywhere for some properties, such a large houses of multiple occupation.
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Old Nov 5th 2017, 1:32 pm   #15
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Default Re: As a non resident is it a smart move to purchase UK property now

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Originally Posted by Benson55 View Post
With Brexit making the whole UK economy unsure it may be best to wait until ...., the pound comes down .....
There is no reason to expect the pound to fall from here. It is already up significantly from the low point after the Brexit vote, and that is despite the talks on post-Brexit trade clearly not going well. The other day, on reports of the talks being accelerated, the pound spiked up in value.
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