Investing in UK Property from the US
In this guide we will talk you through everything you need to know about investing in UK property if you are from the US.
Why Invest in UK Property from the US?
With mortgage interest rates rising massively in the US in recent times, many real estate analysts are forecasting that US house prices will massively fall, with Forbes even stating that the drop could happen even sooner than expected. With this in mind, many US investors are looking to diversify their portfolio and with the likes of crypto and the stock market continuing to struggle, is it time to look towards the UK property market?
Over the last few years, the UK property market has performed extremely well even despite the unprecedented economic uncertainty brought on by the likes of Brexit and the Coronavirus pandemic. Throughout 2021, house prices increased by an impressive 10.8% and rents increased by 1.8% (2.7% when you exclude London). After such an impressive performance throughout this uncertainty, prices aren’t showing any signs of slowing down.
According to Savills, property prices in the UK are set to see an increase of 17.9% in the next four years, whilst rental growth are set to soar at an even faster rate,18.1% in the same time period. As a result, investing in UK property from the US offers a stable yet prosperous way to diversify your investment portfolio – and we’re here to talk you through everything you need to know about the process.
- 10%
House prices in the UK have increased by over 10% annually for the last 2 years.
- 17.9%
Property prices in the UK are set to increase by an impressive 17.9% in the 4 years to 2028 (Savills, 2023)
- 18.1%
Rental growth in the UK is set to increase by an impressive 18.1% in the 4 years to 2028 (Savills, 2023)
What are the tax implications for US buyers investing in UK property?
Stamp duty land tax (SDLT)
Any non-resident who purchases a property in the UK will be subject to both the standard stamp duty land tax rates, as well as an additional 2% surcharge. Click this link to see the most up-to-date SDLT rates.
Inheritance tax
Non-UK residents who purchase a property in the UK will be subject to inheritance tax. On death, 40% inheritance tax is levied on the value of all UK situated assets for the non-UK domiciled individuals.
ATED
ATED is a yearly tax payable by companies that own residential property with a value of more than £500,000 in the UK. For the most up-to-date ATED rates, visit this link.
Capital gains tax
Capital gains tax is a tax on the profit realised on the sale of a non-inventory asset and is required by both UK and non-UK residents upon the disposal of residential property in the UK. Visit this link for the most up-to-date rates.
Income tax
Any rental income you earn on your UK investment property will be subject to income tax. This can be paid in two ways – either earn your income in full and then pay tax through a self-assessment tax return or allow your lettings agent or tenant to deduct the tax automatically. For up-to-date income tax rates, visit here.
What documentation do you need to invest in UK property from the US?
When it comes to investing in UK property from abroad, there are a few forms of documentation that are required before you can move forward with the purchase to comply with UK anti-money laundering and fraud laws. These checks will usually be conducted by solicitors, banks and the agent you purchased through. These documents include:
- Proof of identity – your passport or driving license are ideal
- Proof of address – a bank statement, utility bill or driving licence are required
- Source of funds – Payslips, tax returns and proof of benefit are among the documents that can be used as proof of source of funds
These documents may be requested at numerous stages throughout the investment so it is important to have the ready from the get-go in order to avoid any unnecessary delays to the process.
Do I need a visa to invest in UK property from the US?
You do not need a visa when investing in UK property from the US, up to the value of £2 million – any investment over this and you may apply for a tier 1 investment visa if you meet the requirements. All you need to invest in the UK are the aforementioned documents. It is important to note that buying a property in the UK does not make you eligible for a UK visa, this is an entirely different process.
Can I get a buy-to-let mortgage when investing from the US?
Whilst you can technically get a buy-to-let mortgage when investing in UK property from abroad, the process can, at times, be slightly more challenging for a non-UK resident. Many lenders are unwilling to lend to non-UK residents and those that do tend to require higher deposits and have higher interest rates.
Can I manage my investment from the US?
Upon completing your investing, you are now a landlord and have a number of responsibilities that come with this that can be difficult to manage from abroad. Luckily, there are alternative management methods. Lettings agents offer full property management services, allowing the landlord to take a step back from wherever they are in the world and ensure your investment is as hands-free as possible.
Find out about our current UK property investment opportunities today!
