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Old 06.07.2017, 16:00
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Buying / Investing in property in UK as a second home

I bought a property in Switzerland in 2015 which I live in as my main residence, with a mortgage, together with my wife, and I inherited a property in the UK in 2016, which I just sold.

I expect to buy another property in the same area of the UK, which I will initially keep for myself and then rent out to generate income and stay on the UK property ladder. I recently found out that if I buy a place in the UK, I will now be subject to higher rate stamp duty. This is expensive. On a £350K place, normal stamp duty would be £7.5K, second home stamp duty will by £18K .... quite a hit, considering I would be happy to use it as my "main residence in the UK" initially. Secondly, if I must declare it as a second home, I'm also liable for Capital Gains Tax if it appreciates and I sell it.


1. If I do end up buying a place and renting it out, I assume that I simply declare the income on my swiss tax form, same as any other income source?

2. Therefore, apart from paying council tax, making sure the home is properly insured, is there any UK administration to take care of?

3. At the moment I am between jobs so in theory could decamp to the UK for awhile, but I guess it can't be that simple to avoid the higher rate stamp duty.

4. How are your experiences of being a homeowner here and keeping a place back in the UK? Good / bad / too much trouble / worthwhile?
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Old 06.07.2017, 16:11
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Re: Buying / Investing in property in UK as a second home

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4. How are your experiences of being a homeowner here and keeping a place back in the UK? Good / bad / too much trouble / worthwhile?
No idea about the rest - but own property in Italy and UK...

Italy is a nightmare if you don't go there at least 4 times a year to sort out things. Have now sold all my Italian properties bar one... too much hassle. The council is a pain in the rear...

UK is better, and is even "acceptable" if you have an agency that you trust dealing with the admin for you. Yes, they take a significant chunk of the rental pie, but it means you don't have to fly over every time the tenant loses the keys, the pipes burst as the tenant went on holiday and didn't leave the heating on, or the boiler turns off on the 26th of December and they don't know how to turn it back on (all past situations)
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Old 06.07.2017, 16:17
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Re: Buying / Investing in property in UK as a second home

1. Even if you don't rent it out, you have to declare a theoretical rental income for it on your Swiss tax return and also the property's value or mortgage if you take one out to buy it which goes in the wealth column of your return.

3. If you spend a certain amount of time in the UK during the year you become a resident for UK tax purposes.
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Old 06.07.2017, 16:47
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Re: Buying / Investing in property in UK as a second home

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1. Even if you don't rent it out, you have to declare a theoretical rental income for it on your Swiss tax return and also the property's value or mortgage if you take one out to buy it which goes in the wealth column of your return.

I wasn't aware that the eigenmietwert thing applies to to a UK property. I thought you just had to declare it's value for wealth tax?

3. If you spend a certain amount of time in the UK during the year you become a resident for UK tax purposes.
Not sure what the implications of that would be, as I pay my taxes in Switzerland. I forgot to mention, I have dual Swiss / UK nationality.
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Old 06.07.2017, 16:59
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Re: Buying / Investing in property in UK as a second home

Maybe nothing, but you might also owe the UK tax as well I suppose. Depends on what the various tax treaties say. Contact HMRC and ask.
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Old 07.07.2017, 17:36
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Re: Buying / Investing in property in UK as a second home

Tax on income for property is taxed in the country the property is located...

If you are planning on getting a mortgage for the property in the UK you may have problems. BTL lending has tightened up a lot, plus you may have difficultly convincing lenders that a salary paid in foreign currency is worth them lending GBP against. It does not tick their box as easy...

Oh and if you are not currently working that may be difficult. Even if you can prove you are independently wealthy.

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Old 07.07.2017, 18:15
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Re: Buying / Investing in property in UK as a second home

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I bought a property in Switzerland in 2015 which I live in as my main residence, with a mortgage, together with my wife, and I inherited a property in the UK in 2016, which I just sold.

I expect to buy another property in the same area of the UK, which I will initially keep for myself and then rent out to generate income and stay on the UK property ladder. I recently found out that if I buy a place in the UK, I will now be subject to higher rate stamp duty. This is expensive. On a £350K place, normal stamp duty would be £7.5K, second home stamp duty will by £18K .... quite a hit, considering I would be happy to use it as my "main residence in the UK" initially. Secondly, if I must declare it as a second home, I'm also liable for Capital Gains Tax if it appreciates and I sell it.


1. If I do end up buying a place and renting it out, I assume that I simply declare the income on my swiss tax form, same as any other income source?

2. Therefore, apart from paying council tax, making sure the home is properly insured, is there any UK administration to take care of?

3. At the moment I am between jobs so in theory could decamp to the UK for awhile, but I guess it can't be that simple to avoid the higher rate stamp duty.

4. How are your experiences of being a homeowner here and keeping a place back in the UK? Good / bad / too much trouble / worthwhile?
It's your second home as you ALREADY own in Switzerland.

Any rental income is subject to taxation in the UK, first & possibly Switzerland second.

You can't avoid CGT as a non resident on property, the government wants prices to fall.

UK house prices are expected 40% if you read the papers, I suspect substantially more. High end London has substantially fallen with not 1 of the 10 expensive flats in the Shard selling after 5 years.
I know of a a house in Highgate that including stamp duty the developer paid £7,480,000, I estimate the renovation at about £3,000,000. (10450 square feet high end complete refurbishment on a victorian building including basement pool etc) The house was originally for sale at £14,000,000, then £12,000,000 & now £10,000,000 it's still not been sold.
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Maybe nothing, but you might also owe the UK tax as well I suppose. Depends on what the various tax treaties say. Contact HMRC and ask.
Your running a business in the UK, so it's clearly taxable in the UK.

Last edited by fatmanfilms; 07.07.2017 at 18:31. Reason: 2nd answer
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Old 07.07.2017, 18:30
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Re: Buying / Investing in property in UK as a second home

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Tax on income for property is taxed in the country the property is located...

If you are planning on getting a mortgage for the property in the UK you may have problems. BTL lending has tightened up a lot, plus you may have difficultly convincing lenders that a salary paid in foreign currency is worth them lending GBP against. It does not tick their box as easy...

Oh and if you are not currently working that may be difficult. Even if you can prove you are independently wealthy.

Regards


Ian
So if I buy and rent something out, I would do a self assessment tax form, is that it? As I have and have had no UK income for many years.

Any purchase would be a cash buy, so no mortgage worries.
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Old 07.07.2017, 18:32
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Re: Buying / Investing in property in UK as a second home

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So if I buy and rent something out, I would do a self assessment tax form, is that it? As I have and have had no UK income for many years.

Any purchase would be a cash buy, so no mortgage worries.
Self assessment & you get the benefit of £11,500 personal allowance, there had been talk of ending the personal allowances for non residents but it has not happened yet.
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Old 07.07.2017, 18:32
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Re: Buying / Investing in property in UK as a second home

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It's your second home as you ALREADY own in Switzerland.

Any rental income is subject to taxation in the UK, first & possibly Switzerland second.

You can't avoid CGT as a non resident on property, the government wants prices to fall.

UK house prices are expected 40% if you read the papers, I suspect substantially more. High end London has substantially fallen with not 1 of the 10 expensive flats in the Shard selling after 5 years.
I know of a a house in Highgate that including stamp duty the developer paid £7,480,000, I estimate the renovation at about £3,000,000. (10450 square feet high end complete refurbishment on a victorian building including basement pool etc) The house was originally for sale at £14,000,000, then £12,000,000 & now £10,000,000 it's still not been sold.

Your running a business in the UK, so it's clearly taxable in the UK.

Thanks for the info FMF. Sure, but I am talking about a place under 500k on the coast, that's quite different than the megabucks top end properties in London.

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Self assessment & you get the benefit of £11,500 personal allowance, there had been talk of ending the personal allowances for non residents but it has not happened yet.
Well, I guess rent would be around 12k a year, minus maintenance costs... so effectively no real tax for the moment, it would seem.
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Old 07.07.2017, 18:35
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Re: Buying / Investing in property in UK as a second home

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Thanks for the info FMF. Sure, but I am talking about a place under 500k on the coast, that's quite different than the megabucks top end properties in London.
Average earnings outside London is £26,500, realistically average property should cost 3 - 4 times average earnings. 500k is 18.8 times average earnings, will a greater fool really pay more?
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Well, I guess rent would be around 12k a year, minus maintenance costs... so effectively no real tax for the moment, it would seem.
I used to value BTL at 100 months rent so £120,000 in your case which is 4.5 times average earnings. If you believe in mean reversion thats what it's fair value is.
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Old 10.07.2017, 11:38
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Re: Buying / Investing in property in UK as a second home

Well, we all know your views on property FMF. I'm not knocking them, but if I'm looking for a place at £350k, by your calculation, that would be 13x earnings. The new reality is that a lot of couples both work, which the market reflects and would show 7x earnings.

While inflation is rising, and real incomes are not, that obviously doesn't bode well for the housing market. One might also think that increasing inflation might lead to interest rate rises... but in this uncertain brexit environment, no chancellor is likely to risk impacting economic growth by any big interest rate rises.

Another point is that there are so many people who can't get on the housing ladder, and any house price falls are likely to be buffered by some of those people finally being able to purchase.
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Old 10.07.2017, 11:50
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Re: Buying / Investing in property in UK as a second home

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Well, we all know your views on property FMF. I'm not knocking them, but if I'm looking for a place at £350k, by your calculation, that would be 13x earnings. The new reality is that a lot of couples both work, which the market reflects and would show 7x earnings.

While inflation is rising, and real incomes are not, that obviously doesn't bode well for the housing market. One might also think that increasing inflation might lead to interest rate rises... but in this uncertain brexit environment, no chancellor is likely to risk impacting economic growth by any big interest rate rises.

Another point is that there are so many people who can't get on the housing ladder, and any house price falls are likely to be buffered by some of those people finally being able to purchase.
'They can't get on the ladder', there is no ladder the next generation has to be able to afford houses, a 65 year old down sizer will have to sell for what a 45 year old first time buyer can afford. The sooner Help to buy & other props end the better. Insisting on a 20% cash deposit would help....... as prices would drop to what people can afford. (less than 4 times earnings).

Basel III has been delayed....... when it's in force high multiple of salary loans won't exist. Demand is based on the ability to finance & nothing else.

Dodgyken had a thread where he is up by selling a UK house 10 years ago....... I suspect you will be able to buy the 500k house for 2-300k in the next 10 years. The alternative is salaries doubling in 10 years, I think thats very unlikely.
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Old 10.07.2017, 15:15
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Re: Buying / Investing in property in UK as a second home

It makes sense to separate London from the rest of the UK as they are very different markets.

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Old 10.07.2017, 19:12
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Re: Buying / Investing in property in UK as a second home

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Self assessment & you get the benefit of £11,500 personal allowance, there had been talk of ending the personal allowances for non residents but it has not happened yet.
The day that happens I'm selling my rented out UK house...

As for the other OP questions - you can't avoid the higher rate stamp duty while you live in another residence, no matter where.. you have to declare the property's value as part of your wealth statement for swiss tax... i'm under the uk income allowance... but I still declare my income and costs to the swiss.. and I'd recommend getting an letting agent .. they'll take a slice but you'll have some piece of mind
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Old 10.07.2017, 20:02
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Re: Buying / Investing in property in UK as a second home

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The day that happens I'm selling my rented out UK house...
Thats a better time to buy, not sell. Your rent would be 3 times higher than today, why do you bother for such a low return?
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Old 11.07.2017, 17:46
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Re: Buying / Investing in property in UK as a second home

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Thats a better time to buy, not sell. Your rent would be 3 times higher than today, why do you bother for such a low return?
mm... I was blustering.. (it's a EF tradition).. I suppose you're right.. I keep it cos it makes me some money (not more than uk personal allowance) and I might move back to it .. and .. as you say.. maybe i can make more from the rent in the future
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