Planning to invest in a UK property? Know about these 8 tax considerations to get savvy

As per a Financial Express report, “Indians are among the many highest variety of property homeowners in London”. The stated report, revealed in 2022, said that ‘desis’ are keen to “shell out wherever between GBP 290,000-450,000 for a one-, two- or three-bedroom residence in the capital metropolis”. Needless to say, this additionally makes them probably the most prolific property traders in the nation.

In the present situation, home costs in the United Kingdom are witnessing a sharp rise, following a timid 2023. As per a current report by The Guardian, the expansion in March 2024 was stated to be 1.5 %, the very best in the final 10 months. Even with costs going up, one would need to have their line in the water, to get the utmost benefit when the chance presents itself.

While the same old suspects, comprising industrialists and film stars, type the important thing Indian traders in the UK, the market in the current previous has witnessed a change.

As per a November 2023 report from Money Control, “Indians [are now] preferring to invest in property in London for his or her youngsters pursuing larger research in town.”

However, investing in UK property as an Indian nationwide includes a number of tax considerations, which will be dealt with properly beneath skilled steering. Depending in your circumstances and funding objectives, you might have considered trying to think about completely different possession buildings, comparable to proudly owning the property individually, via a firm, or LLP. I can be talking at – Unlock Opportunities in UK Property Market* – on this matter and different issues linked with it.

In the meantime, listed below are eight key factors to get you began:

1. Stamp Duty Land Tax (SDLT): SDLT is a tax paid when buying property in the UK. Different charges apply for residential and industrial properties, in addition to for first-time consumers and extra properties. Make certain to issue this into your price range when buying a property.
2. Income Tax on Rental Income: Rental earnings earned from UK property is topic to UK earnings tax. Non-resident landlords have completely different tax guidelines in contrast to residents. Non-residents may have to pay tax on gross rental earnings or have the choice to pay tax on web rental earnings after allowable bills.
3. Non-Resident Landlord Scheme (NRLS): If you might be a non-resident landlord (dwelling exterior the UK), you want to register with the NRLS. The letting agent or tenant normally withholds tax from the rental earnings and pays it immediately to HM Revenue & Customs (HMRC) except HMRC agrees you could obtain your rental earnings gross.
4. Capital Gains Tax (CGT): When you promote a property in the UK, you could be liable to pay CGT on any revenue made. The price relies on varied elements, together with your residency standing and the quantity of acquire. Principal personal residence aid could apply if the property has been your predominant residence.
5. Inheritance Tax (IHT): If you personal property in the UK, it might be topic to UK inheritance tax upon your loss of life. However, there are exemptions and reliefs accessible, and tax treaties between India and the UK could present aid from double taxation.
6. Tax Treaties: India and the UK have a double taxation avoidance settlement (DTAA) to forestall double taxation on the identical earnings. Understanding the provisions of this settlement will help in optimizing your tax legal responsibility.
7. Structuring Investments: Depending in your circumstances and funding objectives, you might have considered trying to think about completely different possession buildings, comparable to proudly owning the property individually, via a firm, or by way of a belief. Each construction has completely different tax implications.
8. Professional Advice: Given the complexity of worldwide tax legal guidelines, it’s essential to search recommendation from tax professionals who’re educated about each Indian and UK tax legal guidelines. They will help you navigate the intricacies and guarantee compliance whereas minimising your tax burden.

Always hold your self up to date with the newest tax rules and search personalised recommendation tailor-made to your particular state of affairs earlier than making any funding selections.

*Unlock Opportunities in UK Property Market is an unique session to unravel the potential of investing in Real Estate in the UK via property and actual property bonds. It is collectively hosted by Khaitan Legal Associates, Connected to India, property advertising and administration firm Turn-Key Investments, UK’s main property advertising firm API Global, the 79th Group, British Asset Management firm on the Aftab Mahtab Room, Taj Mahal Hotel, Delhi on April 4, 2024.

About the author: Abbas Jaorawala is a Senior Director and Head-Direct Tax at Khaitan Legal Associates, a company regulation agency with workplaces in India and the United Kingdom.

Disclaimer: Opinions expressed in this text are the creator’s private opinions and don’t replicate the views of Connected to India.