Guide for Nigerians Investing in UK property

Yes, it is also far easier than most of our Nigerians clients expect. With nothing really stopping a Nigerian investor, any more than it would prevent a UK citizen.

 

Why Do Nigerians invest in the UK

• UK stability - It is no secret the UK property market is strong and has remained consistently strong in comparison to almost the whole world. This makes for a safer investment. This along with the stability of the UK legal system.

 

• Nigerian naira Inflation – The Nigerian naira is a very volatile currency, whereas the pound his a more stable option, but even more stable than perhaps the British pound is UK property. This allows Nigerians to invest in UK property to effectively beat inflation.

 

• Strong property market – It is no secret the UK property market is strong and has remained consistently strong in comparison to almost the whole world. This makes for a safer investment

 

How to invest In UK property from Nigeria

 

UK limited company purchase

As a Nigerian you will be able to setup a limited company in the UK. This opens your options with investments and is a far better way to invest in property. With a UK limited company, you will be able to…

• Get a Buy-to-let mortgage with a UK lender or bank
• Hold your property in the company for better tax efficiency

 

In your personal name

There really are no further benefits to investing in your own name and will likely have to be a cash purchase, which is why at Fabrik we point our international clients to setting up a limited company.

 

What taxes will Nigerians have to pay

SDLT

The UKs most substantial tax for buying property is SDLT (Stamp Duty Land Tax) also just known as Stamp Duty.

The tax is a one-off payment you must make when buying a property, and will be a fixed percentage of the property you buy, depending on the value of the property as follows…

 

Property Price	SDLT for Foreigners
Upto £125,000	5%
The next £125,000 (the portion from £125,001 to £250,000)	7%
The next £675,000 (the portion from £250,001 to £925,000)	10%
The next £575,000 (the portion from £925,001 to £1.5 million)	15%
The remaining amount (the portion above £1.5 million)	17%

 

Foreign Property Income Tax UK

The standard income tax for all earners in the UK will be applicable on your earnings. However, in the UK if the rental income is less than £12,570 then the tax is 0%. This allows you to easily have 2 or 3 properties before you must pay any tax.

Most foreign investors will also set this up in a limited company meaning you may not pay yourself a salary or can control how much you pay yourself. So, if you have a company then you could pay corporate tax on your rental income instead, but then the money wouldn’t be yours but your companies, and you would only be able to use that money for your property company.

We are not tax advisors so cannot go into too much detail on how these taxes work, which is why we strongly suggest you speak to an FCA approved advisor (accountant, broker etc…)

With Income tax non-UK residents have an advantage over UK residents. If you’re a UK resident, you must include any other income alongside your rental earnings, but as a non-UK resident you don’t have to do this. This means if your rental threshold is below the £12,57- threshold then you don’t have any income tax, regardless of how much you make in another country. This is thanks to a double taxation agreement the UK has with Many countries.

However, the UK does not have double taxation agreement with every country, meaning you will need to find the exact tax rules in your country to see if this applies.

To learn more about these tax treaties visit the official UK government site and find your countries agreement… https://www.gov.uk/government/collections/tax-treaties

 

Capital Gains Tax

If, you sell your property then you will have to pay a one-off percentage payment of the profit you make. There are a lot of factors that can change how much is deemed as profit.

Capital gains do change every so often but typically will be set for many years, and it also differs depending on factors such as, are you a trust, individual or company.

 

• A non-resident individual 10% or 20% tax for non-residential property.
• For residential property 18% or 28% CGT.
• A non-resident company will pay a flat corporation tax of 17%.
• A non-residential trust will pay a 20% tax on non-residential property
• Residential property for a trust will pay 28% CGT

 

Inheritance Tax

In the UK when assets are passed from one person to another as an inheritance then there is a huge 40% tax, which applies to foreigners as well.

However, the good news is the tax for the property only applies to anything over £325,000, meaning this first £325,000 is tax free with the property.

 

Examples

• A £600,000 property you only must pay 40% of £275,000, which equals £110,000
• For a £300,000 property you have no inheritance tax to pay

 

ATED (Annual Tax on Enveloped Dwellings)

If your UK property is classed as a dwelling the  value exceeds £500,00 and you own through a company then you are subject to this yearly tax. The amount is determined by the value of the property…

 

Property value  Annual charge

More than £500,000 up to £1 million       £3,800

More than £1 million up to £2 million      £7,700

More than £2 million up to £5 million      £26,050

More than £5 million up to £10 million   £60,900

More than £10 million up to £20 million £122,250

More than £20 million    £244,750

 

A dwelling is  property that a place of residence, but does not include properties such as Hotels, Student hall or care homes, making them exempt. For full information you are bets to speak to a tax advisor or visit https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-the-basics

 

What Documents you need to invest

You don’t need loads to be eligible to start the investment process as a foreigner…

• Proof of identity – driving license or passport.
• Proof of address – a bank statement, utility bill, or driving license.
• Source of funding – to show where your money comes from, a payslip or tax return.

 

 

More tips to investing in UK property market

 

• Find a broker– a good well experienced broker will be able to guide you in the right direction on all fronts of the UK market and setting everything up. Acting as your middleman between lenders, advisors, vendors etc…

 

• Get a management and letting company– As you are likely not going to be around to manage the property in any way yourself, then it is worth paying for a good premium management company. They will take care of everything for you from letting your property to looking after it between and during occupancy. This will take the hassle away from you so you can just enjoy the rental income.

 

• Educate yourself– Get to know the market, prices and yields of different areas of the UK market. You may want high yields, or you may just want somewhere to park your cash. Different goals may mean investing in different cities of the UK.

 

• Lock in your exchange rate– As currencies a can fluctuate, you don’t want to agree a deal one day and then when you got to transfer your money the exchange rate completely ruined your property purchase. So, make sure to get a good FX service or currency broker that will be able to lock in your agreed exchange rate.

 

If you are looking to invest in the UK contact us now and we can assist in all the above. Use our online chat form below or call us on or call  +44 (0) 20 8187 5648.

Does owning UK property help to get a Visa

No, this is a separate process, and by owning property you do automatically get a UK work Visa.