In our experience family-controlled HK, Chinese or Singaporean investors in UK property are likely to be affected by the many tax changes affecting the UK residential property market since 2012 and the latest introduction of the Non-Resident Capital Gains Tax on disposal of residential property from 6 April 2015. Such overseas investors need to be aware of the following:
Stamp Duty Land Tax (SDLT)
From 4 December, SDLT for acquiring residential property is charged at different rates depending on the portion of the purchase price that falls within each rate band. There is no change to how SDLT is calculated on purchases of non-residential property or on the rent payable when a new lease is granted.
SDLT rates payable on residential property
- nothing on the first £125,000 of the property price
- 2% on the next £125,000
- 5% on the next £675,000
- 10% on the next £575,000
- 12% on the rest (above £1.5 million)
SDLT is charged at 15% on residential properties costing more than £500,000 bought by bodies like:
- collective investment schemes
There are some exceptions. For example, you pay SDLT based on the new rates and bands where the property is used for:
- a property rental business
- a property development or resale trade
- providing admission to visitors on a commercial basis
Non-residential and mixed-use properties: SDLT rates
- nothing on the property price, premium or value up to £150,000 (annual rent less than £1,000)
- 1% on properties up to £150,000 (annual rent £1,000 or more)
- 1% on properties between £150,001 and £250,000 (rent £1,000 or more)
- 3% on properties between £250,001 and £500,000 (rent £1,000 or more)
- 4% on properties over £500,000 (rent £1,000 or more)
Annual Tax on Enveloped Dwellings (ATED)
ATED is payable by companies that own UK residential property (a dwelling) valued above a certain amount. This tax is payable each year. Most residential properties are owned directly by individuals. But in some cases a dwelling may be owned by a company, a partnership with a corporate member or other collective investment vehicle. In these circumstances the dwelling is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’. The chargeable amounts (unless exemptions apply) for 2015/2016 for a property valued between £1m to £2m is £7,000; £2m to £5m – £23,350; £5m to £10m – £54,450; £10m to £20m – £109,050 and over £20m – £218,200.
From 1 April 2016 a further band will come into effect for properties with a value greater than £500,000 but not more than £1 million, with an annual charge of £3,500. An ATED-related Capital Gains Tax charge can also apply when the ATED property is sold.
Non-Resident Capital Gains Tax charge
From 6 April 2015, if you’re not resident in the UK and sell a UK residential property you’ll need to let HMRC know. You may also have to pay Capital Gains Tax on the gains you make.
The new rules will affect:
- non-resident individuals
- non-resident trustees
- personal representatives of non-resident deceased persons
- certain non-resident companies (generally those controlled by 5 or less persons)
- some UK resident individuals disposing of UK property when abroad
- any of the above who are partners in a partnership
We have covered this NR CGT charge in another page on our site.