Investing in UK property from Hong Kong

Can Hong Kong residents invest in UK property

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

 

Why Do Hong Kong residents invest in the UK

 

• Political safe haven – After the extradition bill in 2019 there has been a significant increase in protests, along with the fear of instability within the Hong Kong independence from China. This has likely influenced Hongkongers wanting to move money abroad.

 

• 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 in comparison to what many Hongkongers fear may influence their own legal system form China makes this a big topic for them.

 

• Strong Hong Kong Dollar – The Hong Kong Dollar performs very strongly against the pound. This can encourage investors to buy UK property as they are able to gain on their own currency when purchasing property in UK pound thanks to the favourable exchange rate. This obviously needs to work in good timing with the flux of the currency for maximum benefit.

 

• Cheaper property – Not many locations In the world boast property considerably more expensive than the UK. It may not be true with London, but the UK has other major cities where you can invest in property from a much lower entry level, such as Manchester or Liverpool.

 

How to invest In UK property from South Africa 

There are two ways to invest in UK property as a Hongkonger…

• You can buy property in your own name or through a UK limited company

 

UK limited company purchase

As a South African 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 Hongkonger 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

 

 

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.