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Misconception on Taxes on UK Property Investment

We always hear investment experts say, ‘Diversify, diversify, diversify!’

It’s easy for them to say that when they have a bank of knowledge available on where to plonk their pennies, right? They have people to study, review and discern the markets every day whilst regular people like you and me tread cautiously — because unlike them, we aren’t subject matter experts.

One question that often comes to mind when discussing diversification of investment is: ‘Is this investment income-taxable?’

But wait, didn’t our former premier, Dato’ Sri Najib Abdul Razak state that foreign income cannot be taxed? Which means that if we have a UK Property Investment, we won’t be…

*Googles frantically*

Wait a minute. Read this!

Based on the article, it would seem that income earned out of Malaysia is not taxable. Now, before the dollar sign begins spinning like a slot machine in your head, there are a few things that you need to understand about UK Property Investment, its lucrative gains and tax exemptions.

In light of the weakened Pound and the uncertainty around Brexit, all eyes are on the UK and the prospect of property investment.

Is UK Property Investment a good idea? (Photo by Michael Tuszynski from Pexels)
Is UK Property Investment a good idea? (Photo by Michael Tuszynski from Pexels)

For first-time investors who are contemplating UK property investment, it does seem like a profitable choice. #DidYouKnow that the total value of UK housing stock increased by £190bil to a mind-boggling £7.29trn from 2008 to 2018 — its highest level ever!?

These figures indicate that UK Property Investment has a strong potential for growth, and one of the best ways to earn from your UK Property Investment is by renting. After all, with the weakened pound, UK Property Investment is more affordable now and the pound is predicted to go up after a Brexit deal is made. Remember,  opportunity doesn’t knock twice.

But before jumping to conclusions, read the fine print to see if you’ve got all your bases covered – with a focus on taxes.

  1. Truth or Myth: Foreign income WILL NOT be Taxed?
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‘Ding, ding, ding!’

That would be accurate; however, there is a clause – let’s break it down to bite-sized pieces, shall  we?

The Malaysian tax system is territorial according to the Income Tax Act 1967, which means income derived from outside the country will be taxed in the country of origin, but EXEMPTED IN MALAYSIA.

Hence, in the case of rental income derived from UK property investment, you WILL HAVE TO pay taxes to the UK Government even if you don’t need to declare it to the Malaysian Government. For a step-by-step guide on this, read here.

However, should your earnings in the UK be below £100,000, you get a personal allowance RELIEF of £12,500 per person. So, if you’ve purchased a property and registered it to two names YOU WOULD GET A RELIEF OF £25,000! That’s massive savings for the investor!

  1. IF I invest in UK property, will I be subjected to Capital Gains Tax?

There are many reasons why Malaysians choose UK Property Investment. It is one way of diversifying their investments — be it a vacation home, for residual income to help fund your child’s education, or, to sell the property a decade down the line once the price appreciates.

Once the property value appreciates and you decide to sell it, you will be subjected to Capital Gains Tax.  

What is Capital Gains Tax?

Capital Gains Tax (CGT) is paid on any gains you make when you sell your property. Your taxable gain is the difference in price between the purchase and sale of your house, after taking away any allowable expenses and your personal allowance (if selling as an individual).

The good news is that all non-UK residents get an annual personal allowance of £12,000 for CGT. Allowable expenses include the stamp duty paid upon the purchase of the property, agent fees and legal fees incurred during the purchase or sale, and payments for valuations made on the property.  

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Take advantage of Personal Allowance to reduce your tax bill (Photo by from Pexels)
Take advantage of Personal Allowance to reduce your tax bill (Photo by from Pexels)

When looking at UK Property Investment, it is crucial to look at the taxes incurred and not just the income gained.

Still contemplating if you should or should not invest in UK property? Here’s a comparison to give you a clearer understanding of your investments in Klang Valley vs Liverpool.

Property in Malaysia


Property in UK


Property Type Townhouse

Freehold, Residential

3 bedrooms


Freehold, Residential

3 bedrooms

Property Price RM1,500 000 RM533,800 (£100,000)
Monthly Rental RM3,200 RM3,470 (£650)

At almost the same rental yield, your initial investment is less than HALF of what you’d be getting in Bangsar.

What will happen to the economy after the finalisation of Brexit? (Photo by from Pexels)
What will happen to the economy after the finalisation of Brexit? (Photo by from Pexels)

UK Property Investment is the Gold Rush of today and there is a lot of talk (which we do agree with) to buy NOW!

If financing is a concern, then you’ll be relieved to know that there are several local banks that provide financing for overseas property investment. With the uncertainties of Brexit looming around till at least October, the UK is literally on sale!

You know that property is a stable and solid investment and, most importantly, it provides a definitive long-term return. So here is a simple logic that you can apply – buy when it’s low; sell when it’s high. All you need is the patience to wait it out.

If we’ve piqued your interest and you’re keen on getting details on UK Property Investment (your easy guide to property shopping in the UK) drop your details in the contact form below and we will link you up with a UK Property Investment just for you.

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