Category: Real estate

Buying Real Estate In The UK: The Questions & Answers

International and offshore businessmen typically think over the fact whether you need to clarify the ‘origin’ of money to purchase real estate. Although this is not essential, all the conveyancing solicitors  in the UK are required to comply with the requirements of the law on counteraction to legalisation (laundering) of funds obtained by criminal means. This means that the lawyer ‘must know a customer’: he or she must verify the identity of the private buyer, or check out the statutory documents of the company, a private buyer may also be required to make a copy of the utility payments or bank statement confirming the address of permanent residence. The lawyer may also ask questions about the origin of the money to buy property. Remittances should be made only from the personal account of the buyer or from the settlement of accounts, and not from a third party account. You can use the account of any country. If at any stage of the transaction has suspicions regarding the origin of the money, the lawyer is obliged to notify the competent authority, otherwise it may not only lose their professional status, and himself be prosecuted.

Do you have to pay some taxes?

Unlike in other countries, in the UK there is no annual tax on property ownership. However, the owner and the tenant, have to pay council tax (Council Tax), which goes to finance police, schools, streets cleaning, etc. The amount is set by the municipality and can vary dramatically even within a single city (typically, it ranges from 200 to 2500 pounds per year). The owners of almost all the apartments must cover building maintenance which costs from 1,000 to 10,000 pounds a year. So you should better clarify the size of the payment to avoid unpleasant surprises.

Does the ownership of real estate in the UK provide benefits in obtaining visas and permanent residence?

Officially, the ownership of real estate in the UK does not provide any benefits to owners for permanent visas, residency and citizenship of the more, however, as experience shows, this is an important first step in this direction. There must be a comprehensive approach to the issue, do not skimp on the advice of qualified experts on immigration and the legal tax optimisation.

What are the advantages and disadvantages of the apartments in the old historic homes?

Many of our customers initially consider only modern apartments because of fears associated with a technical condition of old buildings. However, the Brits watch their architectural heritage carefully, and the risks associated with demontage or are not really high. Some people are necessarily looking for parking options included, but not many realise that having a vehicle in the capital is an extremely pricey. In addition, city officials seek to encourage motorists to switch to public transportation and taxis – through developments in transportation and raising the operational expenses associated with having a vehicle – from high parking costs to paid entrance to the center and huge fines.

The nuances of leasehold and freehold

The concept of leasehold is applicable to apartments and houses, a plot of land or an entire village ownership. But in this case, the term ‘ownership’ implies certain limitations. The concept of leasehold is similar to the concept of long-term lease. Legally, you will not be the owner. By definition – buying real estate on the basis of ‘leasehold’, you become the full owner of the document, referred to as a long term lease, which in turn gives you the exclusive right to temporary use, disposal and occupying space located inside the building. The lease contract can be concluded for any number of years, from 20 to even 999 years. To help you navigate the situation,  you can expect to shell out about 75% of the house for freehold of 50 years that gives you the exclusive use. For 25 years this number will equal about 55%, for 10 years – about 35% (in each case the value may vary within 10%). Leasehold for 90 years or more years of use in the contract is called virtual freehold for the simple reason that its cost is almost equal to the freehold property.

Technically, the apartment or house remains in physical possessions of a landlord or freeholder – the one to whom you have paid for the exclusive right to stay in the aforementioned premises and, most likely, but not always, in addition obliged to pay land rent (or ground rent) annually, which can vary from £25 up to £500 a year, but in rare cases it may be as high as £10,000 – £50,000 a year (for, let’s say, a multimillion mansion of Chelsea and Belgravia). In this case, If you want to carry a pair of walls or windows to change, you need to request a permit from the very landlord. When you acquire property, in any type of ownership you will have to add the services of conveyance solicitors – the mediators between you and the seller (typically ranging up to 3% from the deal).

A more thorough examination of leasehold gives an understanding that the system is very similar to the international concept of long-term rent, with the only difference that you pay once and a huge sum. Of course, you will have more rights in comparison with a regular tenant, but at the same time, less than in case of a full-fledged owner.

So what should you know about property types in the UK? Two simple truths: freehold has the same meaning as the ownership of real estate in any other country. Leasehold gives you an exclusive possession of the property for a certain period of time and, as a rule, for a nominal annual ground rent. leasehold estate price falls over time because with every year you pay less according to the lease agreement. If you don’t take the necessary measures and fail to extend a lease, you can lose all the rights to the use the property. However, if the contract is still active for the next 100 years, there’s no need to worry, at least in the next 15-20 years.

The tax system for residential property in England

The absolutely crucial taxes to consider when buying residential real estate are: inheritance tax, income tax and tax on capital gains. Before considering the peculiarities of payment of these taxes, we want to focus your attention on the basic nuances that make up the importance in determining tax liabilities.

First of all, it should be established whether a person acquiring property is a resident of England. In some cases, the current practice of giving the country the status of resident in the event that the person is residing in the country for at least one day a year. In certain cases recognised may be the individuals staying in the country for 90 days or more, some people may face tougher requirements in this case. Therefore, checking the resident status opportunities is a crucial aspect.

Another issue that requires consideration is the study of the concept of ‘domicile’ – a person with permanent residence. If a person has the status of a resident of England, it is required to determine the territory of the state and his place of residence on a permanent basis. If the person is not a permanent resident in the UK, the tax on capital gains tax and the approach taken attributed to capital gains, which is obtained in England, or the same was transferred to the UK. Those persons who permanently reside in the United Kingdom are required to pay tax on income from capital gains and income tax. Such payments shall be made in any country of the world, even if the returns have been originally obtained not in England. What does the term ‘permanent residence’ include? The concept has nothing to do with citizenship or nationality. Under the country, serving as permanent residence, one may understand what is considered to be home country. In the case of calculating the tax on inheritance is considered that a resident has lived on the territory for 17 years out of the last 20 fiscal years. However, this does not apply to the calculation of income tax and capital gains for tax – a consultation with conveyance solicitors is a typical way to prevent the possible problems.

real estate ownershipThe third important issue is the registration form for registration of ownership of the purchased property. It will take place at the registration name of the person or the object will officially belong to an offshore company or managed by the fund. Different situations require different approaches.

It is also important to take into account the income tax on profits, for example, when providing a housing for rent in England, is charged regardless of the status of the owner of the object. Payment of all the expenses for tax payment may be due to the rent, as it can repay the costs associated with the improvement of living conditions at the facility. The final and, perhaps, the most important aspect is the account of the method of operation of real estate. The method of operation will define the ownership type and tax status, which added to the investors in the UK.