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Investment Vehicles: Buying A UK Property

Have you ever wondered if you should invest in property through an investment vehicle, instead of as an individual?

In this three-part series on investment vehicles, we’ll go through the various types of taxes that are applicable when buying property in the UK individually and through a company, so that you can have a better idea of the differences between the two.

Different taxes apply at different stages of owning a property — when you buy it, whilst you own it, and when you sell it.

In Part 1 of 3, we go through the initial stage of owning a property in the UK, which is when you buy one.

The tax involved when you buy a property is called the Stamp Duty Land Tax (SDLT).

Stamp Duty Land Tax (SDLT)

When buying a property, you are required to pay stamp duty to HM Revenue & Customs within 30 days of completion.

Generally, your solicitor, agent or conveyancer will assist with filing and paying the tax on your behalf and adding that amount to their fees. Otherwise, you can file the return and pay the taxes yourself.

 

BUYING AS AN INDIVIDUAL

Residential Property

First-home buyers

If this is your first home purchase, and it costs less than £500,000, you can claim relief as a first-home buyer.

This means that you don’t pay any stamp duty up to £300,000 and only 5% on the portion from £300,001 to £500,000.

Stamp Duty for First Home Buyers (buying as individual)

If you already own or previously owned a home outside the UK, you can’t claim relief.

If your first home purchase costs more than £500,000, you follow the rules for Single-House Owners.

Single-House Owners

Single-house owners are those who have previously owned a house before, but have sold it. 

This also applies to property outside of the UK.

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Single-house owners don’t pay any stamp duty up to £125,000.

You only begin paying stamp duty at various increments from the next £125,000 (the portion from £125,001 to £250,000) onwards.

Any portion above £1.5 million is charged at 12%.

Stamp Duty for Single-House Owners (buying as individual)

Multiple-House Owners

If buying another house means you will own more than one property, higher rates apply, unless the house you are buying is less than £40,000, in which case you pay 0% stamp duty.

Stamp duty rates are higher by 3% across the bands for buyers who already own a home (in or out of the UK).

Stamp Duty for Multiple-House Owners (buying as individual)

If you own just one house now, and are planning to buy a new one as a replacement, Multiple-House Owner stamp duty is applicable. However, you can get a refund if you sell the old one within 36 months of purchase.

 

Commercial/Non-Residential Property

Buyers of commercial property don’t pay any stamp duty for property price up to £150,000.

You pay stamp duty of 2% for the next £100,000 (the portion from £150,001 to £250,000).

Any portion above £250,000 is charged at 5%.

Stamp Duty on Commercial Property (buying as individual).

 

BUYING THROUGH A COMPANY

The taxes are different if you are buying through a company:

Stamp Duty applicable to companies

Do stay tuned for Part 2 of Investment Vehicles: Owning a UK Property.

What are your thoughts about buying UK Property through an investment vehicle? Drop us a comment below. If you are interested to explore UK Property’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

Disclaimer: This article serves as a guide to investors. Kindly note that CSI Prop is not a licensed tax advisor. Accordingly, you should seek advice based on your particular circumstances from independent advisors and planners. 

By Ian Choong

Sources:

  • Gov.uk
  • Featured image: lowimpact.org

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