mmhendrie

Ok, so expat mortgages look tricky. I think I can secure enough of a HELOC to buy a home in the UK and have it rented for 2-3yrs before I move back. I want to get the money into the UK ASAP while exchange rates are good. A couple of questions if anyone has done any part of this process:

1. I don't have a UK bank account. As others mentioned, I can move the money to the UK with Wise - but am weary of leaving a lot of money in Wise for an extended period of time, as its uninsured. Can I transfer large sums of money ($500k+) to multiple family members, and have them park it in their bank accounts for me till the mortgage is actually due? Any issues there? Not gifting them the money, just having them hold it.

2. Buying a house seems straight forward with cash. massive amount of Stamp tax will be due tho, basically +3% and plus +2% ends up doubling the rate for the range i'm looking at - 650k GBP - Stamp would go from circa 18k GBP to 40GBP. I'm not selling my residence in the US within 3yrs, and i wont be a UK resident at purchase - anything i can do about the high Stamp rates??

3. Seems like rental income would be 20% paid in the UK, and I can get credit for that when filling my US taxes with the US/UK tax treaty. Any other good sources of info on this? Anything I need to set up special in how I hold title in the UK etc.?

Any other general advice from anyone who's done this before. Owned a couple of homes in the US, but left the UK aged 20, so feel like a fish out of water dealing with the UK stuff.

thx in advance,
Matt

Glasgow Girl

1. Sending money overseas to family members could be viewed by the IRS as evading foreign account reporting laws and taxes on foreign assets, the consequences of which can be extremely serious. It could also look like money laundering on both sides of the Atlantic. Transactions in excess of $10,000 will be electronically reported to the various agencies. Will anyone actually look at them, maybe, maybe not, but if they do you and your family members could have some serious problems on those fronts. Also, what could possibly go wrong with providing family members large sums of cash and getting it back. Seriously, no matter how much you trust your family members. You and your money will likely be safer in a Wise account.

Fidelity in the US will let some customers maintain a foreign currency account. They will exchange currencies and store the proceeds in a personal account. You can also deposit foreign currency, but I have always found the Fidelity rates to be very good and on par with Wise. They pay interest as well, although of course it’s not a whole lot right now. Likely many of the other big brokerages provide this service as well, although you may have to be an existing customer. I would call Fidelity and others, and see if they will allow you to that. Perhaps start with anyone you already have funds with.

One advantage of holding the funds in Fidelity in the US, or any other US brokerage, is that the account is not classified as a foreign account (because they report all accounts and transactions directly to the IRS) and you avoid the reporting issues surrounding foreign accounts (at least for that account).

2. On the stamp duty front as an existing homeowner, and a non UK resident, you are stuck paying 5% stamp duty on the first £250K and 10% over that. The rules are pretty airtight, including classifying property held overseas as an existing home.

3. I used to rent out a UK property that I owned prior to moving out here. I never paid any tax to the UK because the rental income minus UK allowed expenses never exceeded my personal allowances. I filed an annual self assessment UK tax return identifying zero tax due. After a while they told me to stop filing until any UK derived income exceeded my personal allowance, which it never did. Assuming nothing has changed on that front, you don’t need to have tax withheld by the renting agent. File form NRL1, this link provides more information. https://www.gov.uk/government/public...dividuals-nrl1. You need to be a UK citizen to benefit from the personal allowance, and I think they now require that you hold a UK passport. If that is true it may be in your best interests to get a UK passport if you do not have a current one. You can simultaneously hold a US passport and a UK passport, although you have to use your US one to enter the US. https://www.gov.uk/tax-uk-income-liv...onal-allowance

And, of course you have to taxes on the rental income to the IRS.

Pulaski

That's a good idea, I wonder how you thought of it?

You can complete a house purchase in the UK with a wire (indeed that used to be prevalent, using a domestic (in-UK) wire, and may still be), so there is no reason why you can't wire the payment directly from the US. The downside is that you won't know the precise exchange rate on the day you need to send the wire until you need to send it, but IMO the wire overcomes other issues making the price worth paying.

Better than the above, you should be able to send the wire to your solicitor, to hold in their client account, ahead of completion, and though there may be a charge from your solicitor, I would strongly recommend that over trusting relatives with large amounts of your money. There are numerous possible problems wiith trusting relatives, such as the relative becoming uncooperative, funds being transferred out of the account (including by a joint account holder who is not your blood relative, or under a court order to settle a debt, etc.), the relative being unable to make the transfer timely when required, such as them being on holiday at the time, or even the relative dying unexpectedly and your funds getting tied up with the executor and matters of probate, especially if the tranfer and holding of funds isn't clearly documented, that the funds are "being held in trust on your behalf."

If you are interested in this, you should research sending wires from your bank welll ahead of time, i.e. before you make an offer on a house, so that you know you can complete the purchase smoothly.

Do not underestimate this advice - the wire reporting should not concern you, but a large wire leaving your account might raise a red flag at your bank, but more likely is that having large wires from overseas hit your relatives' accounts in the UK is more likely to raise red flags assuming that your relatives rarely, if ever, receive wires from overseas.

The consequences of such red flags are likely entirely benign, but are unpredictable and have the potential to be severe, leading to things such as attempts by the HMRC to levy taxes, the funds being seized pending a court review of your explanation of where the money came from and why you were sending it to who you were sending it to, or perhaps most likely ("possible", though still likely improbable), your relative's account being closed by their bank. The problem is that there is no way of knowing if any of these will happen until the $4!t hits the fan and it is too late to do anything but deal with the consequences.

mmhendrie

terrific - thank you both - excellent advice. I think i'm going to start talking to a couple of brokerages, i have accounts with a couple of big guns - so hopefully they can help me. I like the idea of converting my USD to GBP ASAP, as I'm worried that delays while i house shop etc. if the GBP strengthens against the dollar, i will lose my purchasing power. Obviously it could weaken also, and I would miss out, but the amount i have access to right now, at the current exchange rate, puts me at a good level for the house type/location i'm looking at, and I'd had to get priced out on the exchange rate.

Also, I see the fed meets this week and everyone is expecting rates to go up .5-.75% - so i'm am now desperately trying to get a rate lock on the HELOC - which are typically variable, but I found a lender who will lock for 7yrs, which seems like a good thing right now. If rates drop later, I can refi back out again.

thanks again!!

Pulaski

You're very welcome.

robin1234

That is what I did when I bought a flat in England, a cash purchase. I simply wired the entire amount direct to my solicitor a couple of days ahead of completion.

bethel

We are also thinking of buying a property that we can rent out and/or stay in when we visit the UK. We want to move back there when we retire, which will be less than 10 years, maybe sooner if we manage to save enough money. We have an idea of making more of a gradual transition over there, rather than one big stressful move. Anyway, the idea of doing it with a HELOC is interesting. The stamp duty is a real bummer though. I’ve wondered if there’s a way we could buy it with my sister, who lives there, and having her name on it would make a difference?
I’m interested to see how things go for you, and what you learn about it along the way.

spouse of scouse

Unfortunately buying a property with your UK-based sister won't make a difference. The higher rates of SDLT (stamp duty land tax) apply to each individual buying the property, so even if only one buyer has to pay the higher rates then the higher rates are charged on the entire property purchase price.

https://www.gov.uk/guidance/rates-of...n-uk-residents
https://www.gov.uk/guidance/stamp-du...rates-apply-to

The above is for property purchases in England and Northern Ireland.

bethel

BUT!! Wait a minute!! I’m buying in Wales! No stamp duty there apparently. There’s something called Land Transaction Tax, I’ll have to do some research to find out if this is a better or worse scenario than the stamp tax. So, possibly good news, or not…

Pulaski

If you're paying over £225,000 then the LTT becomes a tidy sum fairly quickly, and if you already own a home, as you do, there is no 0% band and you pay a higher rates.