The start of a new year is the perfect time to consider new potential investment opportunities and one avenue that Is growing in popularity is investing in buy to let property in the UK. In the midst of economic uncertainty many people may be wondering if UK property is still a good investment – whilst this is an understandable concern, the UK buy to let market has become known for its tenacity and ability to bounce back during periods of economic downturn.
With a predicted house price growth of 12.9% over the next five years, there is great potential for a high rate of returns when investing in UK property. As the ongoing supply-demand imbalance is set to continue alongside the UK’s growing population, it can be said that the overall housing market should remain relatively stable.
With the somewhat straightforward process involved in investing in UK property it is no wonder that UK buy to let appeals to international investors – particularly those from Singapore. For example, there are no restrictions placed on Singapore citizens who want to invest in UK property – you would only need residential status if you plan on living within the UK.
This guide will aim to give those living within Singapore with an interest in investing in UK buy to let property a brief overview of the process and some of the costs involved. It is important to note however that consulting a financial expert before undertaking any type of investment is essential to gaining a good grasp of some of the ins and outs of the process.
What do Singapore investors need to know?
Although Singapore law has much in common with English law, when it comes to investing in property there are a number of legal differences that you need to be aware of.
The main distinction will be gaining access to an international buy to let mortgage – this will consist of going through a specialist lender to find the best rates. International investors will be subject to stricter background checks which will include varying levels of paperwork. The standard form of documentation will include proof of identity, proof of address and your main source of income.
Some Singapore-based mortgage lenders can also offer UK buy to let mortgages in certain cases too – this can be in either UK pounds (GBP) or Singapore Dollars (SGD) but its important to think about what will work best for you.
Ultimately, when investing in property abroad, it is desirable to work with trustworthy partners to make the process run as smoothly as possible. Accessing a buy to let mortgage will involve working with solicitors, banks and the agent handling the process – so it will be helpful to conduct research beforehand to ensure it all runs smoothly.
Depending on the location, UK property can be up to 25% cheaper than Singapore – especially with property located outside of London. This can be particularly appealing to Singapore-based investors – but it is vital to consider the three main types of tax international investors are subject to when investing in UK property:
Stamp Duty Land Tax (SDLT)
Upon purchasing a property within the United Kingdom each investor will be subject to the Stamp Duty Land Tax which works similarly to Singapore’s Buyer’s Stamp Duty (BSD). SDLT operates via a progressive tax system which means that buy to let investors will be subject to varying tax rates depending on certain portions of the property price.
Non-resident rates of SDLT will be subject to an additional 2% on top of the regular rate – this regular rate is subject to specific circumstances. For example, at present, property purchased for between £250,001 to £925,000 will be subject to a stamp duty tax rate of 5%.
Additionally, first-time buyers, for example, will be granted a discount – whilst those purchasing an additional property will be subject to a higher rate. The type of property purchased will also influence the amount of stamp duty pax you will pay – for example, residential units will differ from commercial or mixed-use properties.
Stamp Duty Tax must be paid within the first two weeks of purchasing the property – it is recommended that you use a solicitor as they may be able to identify any stamp duty relief that you may be entitled to.
Capital Gains Tax (CGT)
As an international investor it is vital that you have an overarching grasp of the entire investment process from start to finish. For example, upon the selling of an investment property within the UK you will be subject to a Capital Gains Tax if any profit has been made.
This tax is calculated through the property’s sale value being subtracted from the original purchase price – the exact amount you pay will vary depending on factors such as income, for example. Basic rate taxpayers should be expected to pay around 18% CGT whilst higher and additional-rate taxpayers can expect to pay up to 28%.
On the contrary, if you make a loss on your original investment purchase you can carry it forward and deduct it from any capital gains in the future. It is also worth noting that each individual is subjected to an allowance of £12,300 which means that the first £12,300 on any gain made when selling the property will be exempt from the Capital Gains Tax.
Non-Resident Landlord Scheme (NRLS)
Perhaps an important distinction for any Singapore-based investor interested in UK buy-to-let is the Non-Resident Landlord Scheme – this applies to any individual who spends more than six months outside of the UK in any given tax year.
Singapore investors will be automatically enrolled onto the scheme which will ensure income tax is paid solely on the UK property as opposed to any additional domestic Singapore property the investor may also own. This is helpful as it halts the prospect of double taxation occurring.
However, this does not mean the UK investment property won’t be taxed – as mentioned earlier it is important to consult a financial expert to gain insight into the process in order to ensure the investment has as much chance of being a success as possible.
