Many expats like to keep ownership of their UK property when they move abroad – perhaps to generate an additional income stream, to have a bolt-hole to return to, or simply for sentimental reasons.

However, while retaining property might seem appealing at first, doing so could result in a bigger-than-expected tax bill and an unwanted administrative burden. When you combine this with potential house price declines and difficulties in securing a mortgage, it may be the case that a diversified investment portfolio would be a better long-term solution.

Here, we look at some of the key points to consider for those who hold UK property.

Tax implications
If you choose to keep your UK property and rent it out to tenants, you will need to submit a UK tax return and pay UK income tax on the rent. Depending on where you live and local tax rates and dual tax treaties, it is also possible that you might also face additional income tax in your current country of residence.

Further taxes may be due if you decide to sell your property after moving abroad. Although capital gains tax (CGT) usually only applies to UK residents, there are circumstances in which an individual may be liable for CGT if they sell an asset as a non-resident. One such instance is if a non-resident sells or disposes UK property or land. In this scenario you will be required to submit a ‘non-resident CGT return’ within 30 days of the date of conveyance and will pay CGT at up to 28% on gains that exceed the annual CGT exemption. There may also be additional capital gains implications, again depending on your residence.

Furthermore, if you choose to pass on UK property through your will, there could be tax implications for the inheritor. For example, if the beneficiary is in the middle of buying a home, they could face a higher stamp duty bill. This is because the home they are buying would be classed as an additional residential property and be subject to a surcharge on top of usual stamp duty rates.

Additional buy-to-let considerations
For those who are considering keeping their property and renting it out, there are other potential pitfalls to be aware of.

While renting out property offers the opportunity to generate regular income and benefit from a potential rise in house prices, investing in buy-to-let in the UK is not as straightforward as it may seem. Rental properties require a lot of upkeep, and it is not always easy to find tenants. Expats will most likely need to use a property management company, which together with the cost of repairs, void periods, and legal fees, could easily eat into potential returns. Property is also highly illiquid, which means you cannot quickly convert it into cash should you need to do so.

In recent years, the environment for buy-to-let landlords has become more challenging. Expats may find that there are only a small number of lenders willing to offer them a mortgage. There have been reports of some banks withdrawing mortgages for UK expats when their term ends. Even if it is possible to secure a deal, higher interest rates could mean it is more difficult to remortgage at an affordable level.

Meanwhile, there are concerns about a property market slowdown. In the 12 months to August 2023, UK house prices fell by 5.3%, the biggest annual fall since 2009, according to Nationwide.

Diversified investment portfolio
For clients who are thinking about retaining their property as a buy-to-let investment, it is always worth reviewing their other options.

Investing in the stock market, for example, could offer several advantages over buy-to-let. Losses are limited to the original investment (there is no risk of ‘negative equity’), shares take less time to manage, and they can be easily sold if needed. Investing in equities is also more efficient from a tax point of view, as shares can be held within a tax wrapper.

While it may still be possible for expats to earn money as a private landlord, the tax implications and changing market backdrop mean it may be more difficult than anticipated.

Make an appointment now

At Blackden Financial we have been advising our clients in Switzerland for the past two decades on just such decisions, so for a no obligation meeting call, +41 22 755 0800, by e mail info@blackdenfinancial.com or complete our Contact Form here

One of our team will contact you and arrange a suitable time to discuss how our service can work for you, and how to get the ball rolling.