UK Tax implications and plan for present non-UK resident

by Readers Question

10:23 AM, 14th March 2016
About 3 years ago

UK Tax implications and plan for present non-UK resident

Make Text Bigger
UK Tax implications and plan for present non-UK resident

I was wondering if anybody can offer me some guidance. I left the UK for work just over 3 years ago, and it is most likely that I will return to London sometime in 2020 once my current employment contract ends.uk

I have 2 properties back home in the UK – one BTL, and one residential (which was my main residence) that I am letting out whilst absent from the country. For years I have been saving like a squirrel and overpaying my mortgages at every opportunity, and now have 125,000 left to pay. By any conservative estimate I presume to have both properties fully paid off by 2020 because both are currently independently profitable (income > mortgage repayment + costs), so I can overpay using both my annual profits plus the money that I send back from my wages abroad.

I have been following the chancellors’ policy changes regarding BTL mortgages and trying to work out my optimal plan of action investment-wise. From my understanding of the situation, once April passes there is very little advantageous investment scope for BTL (as we once knew it) if you have to arrange a mortgage, especially considering the increase in stamp duty.

I had always endeavored to be able to attain a third property… just because that is what you do as a work-driven adult. I can use the excuse that it gives me the option to then pass on one to each of my two young children should they reach adulthood and be at risk of being frozen out of the market.

What I am wondering is – what am I to do with any excess money should I manage to clear my mortgages before 2020 whilst still being positioned abroad? Is there any mathematical benefit to buying that third property as a BTL with a mortgage? Or should I consider buying a third property in the UK only if I can ever afford to do so outright or by putting down a really really big deposit?

I would not know how else to invest any money that I earn…. Pensions are not something I have ever bought into, stocks or shares – no thanks. Property is all I ever believed in, but now the lights have been dimmed to the point where I am a bit stuck.

Also, I have been using an accountant for the last 7 years to fill in my tax returns. I send him my mortgage statement and bank statements with proof of rental amounts, and he apportions the income between my wife (as joint owner) and myself, I get sent a tax bill, and a bill for his fee.

However, because over the last 3 years there is no added interference of earned salary or other income (like I used to have when I lived in the UK) is this something that I should now easily be doing myself via self assessment?

Many thanks

Marco



Comments

Mark Alexander

10:31 AM, 14th March 2016
About 3 years ago

Hi Marco

Definitely keep your accountant as tax is about to get very complicated for landlords.

As you are working and living abroad and have relatively small mortgages have a look at QNUPS as an alternative holding structure.

Search this website or Google for QNUPS for landlords.
.

11:44 AM, 14th March 2016
About 3 years ago

Firstly I would not completely write off investing in pensions. The recent budget changes have highlighted the importance of diversification. There are plenty of Sipp providers out there can make investing in markets via diversified funds relatively simple and do not require much market knowledge (for examole hargreaves landsdown ). SIPPS have the added advantage that because of the tax relief you receive you make instantaneous gains of 20 to 45% based on your tax band. That being said it's only really worth considering whilst you are working and living in the UK. As for buying a third property.....despite the loss of relief....if you have a sufficient enough deposit which and csn make the property pay for itself and not burden you with too large a tax bill then it may well still be worth buying and leverage is still where the main returns achieved from property.

Jon Pipllman

11:47 AM, 14th March 2016
About 3 years ago

Would you consider buying the third property that you aspire to outside the UK?

Marco Camilleri

13:24 PM, 14th March 2016
About 3 years ago

I certainly would, and it was something that had crossed my mind. I have ties to both Italy (Italian wife and mother) and Malta (father). Without knowing the proper ins and outs, the tax situation in Italy doesn’t look that promising, nor indeed does house price confidence. Non-residents face a registration tax when buying a home of around 7%.
Malta instead could be a more sensible option, but I get a feeling that I might have missed the ‘value’ boat there, not so long ago prices were very reasonable.

Mark – I saw from a recent post that you are moving to Malta. Was it easy to buy there?

Mark Alexander

13:42 PM, 14th March 2016
About 3 years ago

Reply to the comment left by "Marco C" at "14/03/2016 - 13:24":

I decided to rent for the first year so I have no experience of buying there yet.
.

Marco Camilleri

16:08 PM, 16th February 2017
About 2 years ago

So, it's been nearly a year since I posted the original question, and now my situation is like this -

Still live and work abroad (and still won’t be coming back before at least 2020) and have two properties in the UK.
Property 1 - my former residence which is now virtually paid off – worth around 380k according to Zoopla achieving a 5.5% rental yield.
Property 2, BTL on an old MX mortgage, valued around 360k yielding around 5% with 50k left to pay (am overpaying regularly).
I also have around 190k in cash.

I have been looking at properties in the 400k bracket in the same area as where my house is situated which achieves decent rental yields for London.
Having inquired into expat mortgages with both HSBC and Skipton International, it looks like I can borrow 400k at an interest rate of around 4-5% providing I leave a 150k deposit, this is something I could manage as it leaves me enough behind for the extra SDLT and possible renovations.

My question is, in my case would it be better off buying a third property in my own name or via a LTD company?
I realise that many landlords are about to feel the full effects of section 24 however I feel fortunate because I am not highly geared and by virtue of the fact that I am currently a non-resident.
My UK property income is around 35k on my two properties which I split equally with my wife.
If my longterm plan is to return to the UK in a few years time with the idea to possibly increase my property portfolio further (instead of working for somebody else), what is my best course of action?

Thanks for any advice

Marco Camilleri

10:17 AM, 18th February 2017
About 2 years ago

Can anybody kindly offer me some advice on this


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

And the landlord vote goes to - ?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More