Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation  
Reply
 
Thread Tools Display Modes
  #1  
Old 13.05.2021, 11:48
Newbie
 
Join Date: May 2021
Location: Zurich
Posts: 4
Groaned at 0 Times in 0 Posts
Thanked 0 Times in 0 Posts
Agos has no particular reputation at present
Investing in real estate in UK

Hi everyone! I am an Italian resident in Zurich, I would like to invest in properties in UK but I am having troubles to understand the best way to do it in terms of taxes.

From what I understood there are 2 main options:

- buying the property as a private, declare the income and the value of the property for the wealth tax in Switzerland, but here I am not sure if the income would be taxed in UK, Switzerland or in both countries.

- buying the property through an LTD Company in UK, the income would be taxed in UK with corporate taxes and in Switzerland I would have to declare my ownership of the company with its value. Here the downside should be more paperwork and difficulties to directly use the income from the rent.

Am I missing something? Especially I have doubts about the taxation of the income from the rent.

Considering that it is going to be a small investment in terms of money, what would you suggest?

Thanks in advance for your help!
Reply With Quote
  #2  
Old 13.05.2021, 12:06
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
Hi everyone! I am an Italian resident in Zurich, I would like to invest in properties in UK but I am having troubles to understand the best way to do it in terms of taxes.

From what I understood there are 2 main options:

- buying the property as a private, declare the income and the value of the property for the wealth tax in Switzerland, but here I am not sure if the income would be taxed in UK, Switzerland or in both countries.

- buying the property through an LTD Company in UK, the income would be taxed in UK with corporate taxes and in Switzerland I would have to declare my ownership of the company with its value. Here the downside should be more paperwork and difficulties to directly use the income from the rent.

Am I missing something? Especially I have doubts about the taxation of the income from the rent.

Considering that it is going to be a small investment in terms of money, what would you suggest?

Thanks in advance for your help!
The rent would belong to the company, so unless it was paid out as fees or dividends it's not yours to spend. Bear in mind that corporation tax is paid on the dividends, however those dividends will have zero tax credit in CH, so tax will be paid twice on the rental income. UK taxpayers pay a lower tax rate for dividends plus a an additional nil rate band for dividends so do not lose out in the same way.
Reply With Quote
This user would like to thank fatmanfilms for this useful post:
  #3  
Old 13.05.2021, 12:29
Forum Legend
 
Join Date: Aug 2015
Location: Basle
Posts: 2,907
Groaned at 76 Times in 60 Posts
Thanked 2,025 Times in 1,178 Posts
Landers has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
Bear in mind that corporation tax is paid on the dividends, however those dividends will have zero tax credit in CH, so tax will be paid twice on the rental income. UK taxpayers pay a lower tax rate for dividends plus a an additional nil rate band for dividends so do not lose out in the same way.
UK corporation tax will be due on the profits(not the dividends). Income tax on the dividends. I believe in Switzerland the taxation could be reduced because of a single owner discount. UK dividend tax credits used to be not recognised in Switzerland but the UK rules changes a number of years ago and now I'm not sure what the situation is. Likely still unattractive. Capital gains tax would apply in the UK I assume. The value of the investment would likely be reduced on paper in Switzerland so you would avoid paying so much wealth tax.
Reply With Quote
  #4  
Old 13.05.2021, 12:41
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
UK corporation tax will be due on the profits(not the dividends). Income tax on the dividends. I believe in Switzerland the taxation could be reduced because of a single owner discount. UK dividend tax credits used to be not recognised in Switzerland but the UK rules changes a number of years ago and now I'm not sure what the situation is. Likely still unattractive. Capital gains tax would apply in the UK I assume. The value of the investment would likely be reduced on paper in Switzerland so you would avoid paying so much wealth tax.
The company pays corporation tax on profits before the dividends are paid, but they no longer carry a tax credit. The dividends are subject to reduced tax in the UK but fully taxable elsewhere.
UK Tax free dividend allowance £2000
Base rate taxpayer pays 7.5% on dividends rather than 20%
Higher rate taxpayers pays 32.5% on dividends rather than 40%
Additional rate tax payers pay 38.5% on dividends rather than 45%

So a Swiss taxpayer will pay full tax on A UK dividend for which corporation tax has also been paid by the company before distribution.
Reply With Quote
This user would like to thank fatmanfilms for this useful post:
  #5  
Old 13.05.2021, 12:50
Forum Legend
 
Join Date: Aug 2015
Location: Basle
Posts: 2,907
Groaned at 76 Times in 60 Posts
Thanked 2,025 Times in 1,178 Posts
Landers has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
So a Swiss taxpayer will pay full tax on A UK dividend...
except the taxable dividend amount will be reduced as being the owner of the company. It's like 40% discount or something, according to my understanding. Which I haven't checked.
Reply With Quote
This user would like to thank Landers for this useful post:
  #6  
Old 13.05.2021, 16:58
Newbie
 
Join Date: May 2021
Location: Zurich
Posts: 4
Groaned at 0 Times in 0 Posts
Thanked 0 Times in 0 Posts
Agos has no particular reputation at present
Re: Investing in real estate in UK

Thanks for the answers! It seems more complicated than expected opening a company, what about if I would buy the apartment as a private? What would I have to pay on the income in that case?
Reply With Quote
  #7  
Old 13.05.2021, 17:14
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
Thanks for the answers! It seems more complicated than expected opening a company, what about if I would buy the apartment as a private? What would I have to pay on the income in that case?
Income tax on profit in the UK, CGT on gains in the UK, wealth tax on value but that is the same as holding cash. Potential IHT at death.
Reply With Quote
  #8  
Old 13.05.2021, 18:20
Member
 
Join Date: Mar 2010
Location: no longer in the forum
Posts: 190
Groaned at 4 Times in 3 Posts
Thanked 173 Times in 90 Posts
jim1 has a reputation beyond reputejim1 has a reputation beyond reputejim1 has a reputation beyond reputejim1 has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
Income tax on profit in the UK, CGT on gains in the UK, wealth tax on value but that is the same as holding cash. Potential IHT at death.
If you own the property directly, For uk income tax the first £12,570 profit is taxed at zero rate

https://www.gov.uk/income-tax-rates

Note If you have a mortgage on a directly owned buy to let property, you used to be able to deduct 100% of interest costs from rent to calculate the profit. UK government eliminated this and now you canít deduct interest (i believe it was deemed unfair that buy to let landlords could deduct interest but not owner - occupiers)

If you own a property via a company I believe you can deduct interest but you pay corporation tax and there is no 12,570 tax free allowance. You also have the cost and paperwork of maintaining a company

In summary, if your profit (without interest deducted) is expected to be much over 12,570 it might be worth running the numbers on setting up a company. Otherwise I suspect it is not worth it

Note I think there is now a higher stamp duty (purchase tax) for non resident buyers

In general landlords in uk are being hit with higher taxes and regulations, and overseas landlords even more so. Prices are also high relative to rents. Uk is not such an attractive place to buy an investment property as it was in the past
Reply With Quote
  #9  
Old 13.05.2021, 18:33
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
If you own the property directly, For uk income tax the first £12,570 profit is taxed at zero rate

https://www.gov.uk/income-tax-rates

Note If you have a mortgage on a directly owned buy to let property, you used to be able to deduct 100% of interest costs from rent to calculate the profit. UK government eliminated this and now you canít deduct interest (i believe it was deemed unfair that buy to let landlords could deduct interest but not owner - occupiers)

If you own a property via a company I believe you can deduct interest but you pay corporation tax and there is no 12,570 tax free allowance. You also have the cost and paperwork of maintaining a company

In summary, if your profit (without interest deducted) is expected to be much over 12,570 it might be worth running the numbers on setting up a company. Otherwise I suspect it is not worth it

Note I think there is now a higher stamp duty (purchase tax) for non resident buyers

In general landlords in uk are being hit with higher taxes and regulations, and overseas landlords even more so. Prices are also high relative to rents. Uk is not such an attractive place to buy an investment property as it was in the past
The personal allowance is against all UK income, interest can be deducted in full for base rate taxpayers, it's only a hit for higher rate taxpayers.
Reply With Quote
  #10  
Old 13.05.2021, 18:52
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 14,952
Groaned at 295 Times in 199 Posts
Thanked 19,026 Times in 8,002 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: Investing in real estate in UK

i'd also question how long personal allowance for EU citizens will remain post-brexit.
Reply With Quote
The following 3 users would like to thank Phil_MCR for this useful post:
  #11  
Old 13.05.2021, 22:18
Forum Veteran
 
Join Date: Sep 2015
Location: Zurich
Posts: 661
Groaned at 3 Times in 3 Posts
Thanked 887 Times in 361 Posts
eairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond repute
Re: Investing in real estate in UK

There is also 3% stamp duty uplift for corporate buyers.


Example: Buy a house costing under 125k as a normal UK resident, and you pay 0% stamp duty. Buy it in a Ltd company and the company pays 3%.


(There's currently a temporary stamp duty holiday, but that only applies to private buyers.)


The non resident uplift is 2%. So in our 125k example, normal UK resident pays 0%, non resident buyer pays 2%, Ltd company buyer pays 3%.


Here's the info from the horses mouth:


https://www.gov.uk/stamp-duty-land-tax


https://www.gov.uk/guidance/rates-of...n-uk-residents





Kind regards




Ian
Reply With Quote
This user would like to thank eairicbloodaxe for this useful post:
  #12  
Old 13.05.2021, 22:35
Forum Legend
 
Join Date: Aug 2015
Location: Basle
Posts: 2,907
Groaned at 76 Times in 60 Posts
Thanked 2,025 Times in 1,178 Posts
Landers has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
i'd also question how long personal allowance for EU citizens will remain post-brexit.
If you're eligible for the personal allowance and claim it, you then can't claim non-resident tax relief on dividends. If you claim non-resident tax relief on dividends then you can't claim personal allowance.
Reply With Quote
  #13  
Old 14.05.2021, 09:16
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
If you're eligible for the personal allowance and claim it, you then can't claim non-resident tax relief on dividends. If you claim non-resident tax relief on dividends then you can't claim personal allowance.
There is no non-resident tax relief on dividends as dividends no longer carry a tax credit.

Last edited by fatmanfilms; 14.05.2021 at 13:12.
Reply With Quote
This user would like to thank fatmanfilms for this useful post:
This user groans at fatmanfilms for this post:
  #14  
Old 14.05.2021, 11:13
Member
 
Join Date: Mar 2010
Location: no longer in the forum
Posts: 190
Groaned at 4 Times in 3 Posts
Thanked 173 Times in 90 Posts
jim1 has a reputation beyond reputejim1 has a reputation beyond reputejim1 has a reputation beyond reputejim1 has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
The personal allowance is against all UK income, interest can be deducted in full for base rate taxpayers, it's only a hit for higher rate taxpayers.
I stand corrected - Interest can be deducted at the basic rate of income tax. Apologies for the error

Uk governments seem to like making the tax rules difficult to remember...
Reply With Quote
  #15  
Old 14.05.2021, 11:27
Newbie
 
Join Date: May 2021
Location: Zurich
Posts: 4
Groaned at 0 Times in 0 Posts
Thanked 0 Times in 0 Posts
Agos has no particular reputation at present
Re: Investing in real estate in UK

Quote:
View Post
Income tax on profit in the UK, CGT on gains in the UK, wealth tax on value but that is the same as holding cash. Potential IHT at death.
Sounds good thanks! And I guess I would have to register to the HMRC for the income taxation. So even if I have an income from Switzerland the income in UK will be taxed with UK rates? In general does the tax free for the first ~12k pounds hold in this case?
Reply With Quote
  #16  
Old 14.05.2021, 13:13
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
Sounds good thanks! And I guess I would have to register to the HMRC for the income taxation. So even if I have an income from Switzerland the income in UK will be taxed with UK rates? In general does the tax free for the first ~12k pounds hold in this case?
Yes it should be subjection to taxation in the UK even if no tax is paid, however some cantons may pretend you need to actually pay tax in the UK which is an incorrect interpretation of the rules.
Reply With Quote
This user would like to thank fatmanfilms for this useful post:
  #17  
Old 14.05.2021, 13:27
NotAllThere's Avatar
Modulo 2
 
Join Date: Oct 2008
Location: Baselland
Posts: 15,042
Groaned at 307 Times in 263 Posts
Thanked 23,222 Times in 9,429 Posts
NotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
Income tax on profit in the UK, CGT on gains in the UK, wealth tax on value but that is the same as holding cash. Potential IHT at death.
The value of assets in the UK at death will be subject to death duty. Anything above £320K is currently taxed at 40%. Your heirs will get their due after this.

Quote:
View Post
i'd also question how long personal allowance for EU citizens will remain post-brexit.
Probably never. It would be a bit weird to make foreigners resident in the UK differently from UK citizens. However, the personal allowance of non UK residents - yeah, that might well disappear.
Reply With Quote
  #18  
Old 14.05.2021, 13:35
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
The value of assets in the UK at death will be subject to death duty. Anything above £320K is currently taxed at 40%. Your heirs will get their due after this.
This assumes the person who died is not UK domiciled, if they were then world wide assets are subject to IHT.
UK domiciled persons also have an unlimited husband / wife exemption when both UK domiciled, which is reduced to £55,000 if one or both are non domiciled.
Reply With Quote
  #19  
Old 14.05.2021, 15:13
Forum Legend
 
Join Date: Jul 2020
Location: Frick, Aargau
Posts: 2,876
Groaned at 62 Times in 50 Posts
Thanked 4,070 Times in 1,901 Posts
HickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
The value of assets in the UK at death will be subject to death duty. Anything above £320K is currently taxed at 40%. Your heirs will get their due after this.

Probably never. It would be a bit weird to make foreigners resident in the UK differently from UK citizens. However, the personal allowance of non UK residents - yeah, that might well disappear.
To be honest I find it very odd they give any non residents, including UK citizens the personal allowance.
Reply With Quote
The following 2 users would like to thank HickvonFrick for this useful post:
  #20  
Old 14.05.2021, 21:21
Forum Veteran
 
Join Date: Sep 2015
Location: Zurich
Posts: 661
Groaned at 3 Times in 3 Posts
Thanked 887 Times in 361 Posts
eairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond reputeeairicbloodaxe has a reputation beyond repute
Re: Investing in real estate in UK

Quote:
View Post
To be honest I find it very odd they give any non residents, including UK citizens the personal allowance.

If you earn over about the EF base salary amount, they take it back.


"Income over £100,000. Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000."


Bastards.


Regards




Ian


PS. this results in paying 65% on that part of your income, IIRC
Reply With Quote
The following 2 users would like to thank eairicbloodaxe for this useful post:
Reply

Tags
flat, real estate, tax




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
investing in real estate vs buying property user137 Finance/banking/taxation 62 06.07.2019 16:13
swiss, investing in french real estate yunggucci Business & entrepreneur 22 18.06.2019 21:44
real estate investing jims Business & entrepreneur 173 13.06.2017 14:56
The REAL real estate prices in Geneva Guest Housing in general 0 16.06.2012 15:15
Investing in Swiss Real Estate funds DavidSJC Finance/banking/taxation 4 20.02.2012 21:34


All times are GMT +2. The time now is 12:25.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2022, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0