Today, more and more high-net-worth individuals choose to buy houses in the UK.
This article will explain the costs related to buying a house in the UK from three aspects for your reference and help you successfully invest in UK real estate.
01: Purchase of property
Stamp duty
When purchasing property in the UK, stamp duty (SDLT) must be paid to the tax bureau when exchanging contracts, so that the sale and purchase transaction can be final or recognized by the government.
From 23 September 2022, the threshold for paying stamp duty for first-time buyers with a total purchase price of less than £625,000 has been adjusted to £425,000.
In addition, local buyers of second homes in the UK need to pay an additional 3% stamp duty, and overseas buyers need to pay an additional 2% overseas buyers stamp duty.Therefore, for non-first-time buyers and those purchasing a property for more than £425,000, the stamp duty rate you will need to pay is:
House payment deposit
After selecting the house of your choice, A reservation order should be signed with the developer and a reservation deposit should be paid.At this time, the developer will remove the house from the sales list and will no longer sell it to others.Moreover, this deposit can be deducted from the down payment later.
Generally speaking, depending on the developer, the deposit for purchasing a house is different, usually between £1,000 and £5,000 (specifically, it also depends on the value of the house. Generally speaking, the total amount of the house The higher the price, the higher the deposit.
VAT, value-added tax, is a tax levied on the value-added portion of the supply of goods or services during business operations in the UK.During the home purchase process, almost all fees incurred by hiring professionals, such as lawyers, accounting services, appraisers, mortgage brokers, investigators, etc., are subject to a 20% VAT.The law firm providing services will provide a specific list of fees and taxes based on specific service matters before the property is closed.
Lawyer fees
Real estate transactions in the UK are rigorous and complex, so a lawyer must be involved in the entire process , ensuring safe and smooth real estate transactions.The lawyer's fees will vary according to the client's actual situation, the complexity of the transaction and the value of the property. The specific price fluctuates between £1,500-£2,500, with stepped fees.Please consult your attorney for specific details.
Loan generation The cost of There will be certain fees when taking out a loan.These fees will vary based on the specific bank and loan product (check with a Fulhouse investment advisor for specifics).
Loan advisory fee
Loan brokers also have rich experience and professional knowledge on financial products in the real estate market and can help Find the loan product that best suits you.When applying for a loan transaction, the loan consultant will charge corresponding fees based on your actual situation.
Loan product fee
Select For a certain loan product, you need to pay product fees for purchasing the loan product.Loan product fees can be added to the loan, but this will increase the amount owed, interest and monthly repayments.
Evaluation fee
When applying for a loan, the bank will evaluate the property being purchased to ensure that the loan can be successfully obtained.There will be an appraisal fee to appraise the property, but some banks may waive this fee outright.
Attorney fees
When the decision is made to use a loan product or a more complex purchase, attorney fees will also increase accordingly.
Real estate registration fee
This is the last way to buy a property in the UK An important step, this step requires a lawyer to register the title of the purchased property with the British Land Registry.The fee varies according to the house price, and is generally 0.05%-0.1% of the house price. This fee is collected by the lawyer.
London real estate has low investment costs and high rental returns, making it a safe haven for investors to maintain their assets.Research by Savills, the world's leading real estate consultancy, shows that the growth trend of London real estate is steady and the investment returns are considerable. However, the costs incurred by overseas investors in purchasing London real estate during the entire real estate holding cycle are significantly different from that of London real estate. Compared with first-tier international cities, it is at a relatively low level.
Municipal tax
After buying a house in the UK, you need to pay municipal tax to the local government every year to support local public service facilities.For example, fire protection facilities, street construction, community libraries, etc. are all based on this part of the funds.Council tax is levied on all local residents on a per-household basis, ranging from £1,000-£2,400 per year for grades A-H.Rental properties can be paid by the tenant, and students who live in them can apply for a full exemption.
Homeowners can apply for municipal property tax exemptions if the following conditions are met:
Property fee
Property fee It refers to a fee paid to the person responsible for managing the "property" or the relevant unit/company. This fee is mainly used to maintain and repair the public service facilities of the building or community.
For home buyers, a house with exquisite exterior and interior decoration and equipped with swimming pools, high-end gyms and other facilities means that they have to pay relatively high property fees every year.Paying a relatively high property fee basically means you will get a great value for money living experience.
Property for rent Income Tax
In the UK, income generated from the rental of properties is subject to personal income tax.The landlord or agency collects the rent first, and then pays the tax due for this year at the end of the British financial year.
For overseas real estate investors, they need to first apply to the government tax department to register as an overseas landlord NRL, and declare their total property rental income every year. Income range subject to rental income tax.
03: Property for sale
Capital Gains Tax
Capital gains tax (CGT) is a tax levied on gains from the sale of assets.As long as the property is in the UK, both individuals and companies will be involved in this tax.
However, capital gains tax (CGT) mainly targets investment properties purchased and rented out, which are classified as "private principal residences" ( Principal Private Residence properties can directly reduce this tax.This means that if you own your home and it qualifies as a "private principal residence", you do not need to pay capital gains tax (CGT) on the profit you make when you sell the property.
First, each person can get a tax exemption of £123,000. If the assets are jointly owned by husband and wife, the limit is £246,000.
Secondly, the UK capital gains tax rates are 18% and 28%.
If your personal income tax rate (Personal Income tax rate) is 20%, you will pay 18% capital gains tax on the profit you make when selling your investment property.
If your personal income tax rate is 40%, you will pay a capital gains tax of 28% on the profit you make when selling your investment property.
Secondly, you can also reduce the amount of "real estate capital gains" by deducting the cost of the property, thereby reducing the tax amount.
These expenses can include attorney fees, agency fees, property expansion, etc. incurred in the process of buying and selling a property.
Inheritance tax
Inheritance Tax is for A tax levied on gifts of property to children (or to others).Therefore, whether you pay a down payment or donate a house, inheritance tax will be involved.
If the property is in an individual’s name , the person who is required to pay inheritance tax is the "property owner", and the heirs (such as children) are not the direct payers of inheritance tax.
Usually when the estate is distributed, the executor (Executor) declared in the will will file and pay taxes to the tax bureau.Generally speaking, parties need to pay tax at a rate of 40% on the portion of the total value of the estate that exceeds the tax exemption amount.
Currently, the inheritance tax exemption is £325,000.If the party leaves all the inheritance to his spouse or partner, charity or community amateur sports club, etc., it is not allowed to Used to pay taxes.
If the party leaves the inheritance to his direct descendants (direct descendants), such as children and grandchildren (including adoption, foster care and step-children), the inherited property is also the "main residence" of the family. residence), you can also enjoy the "additional exemption" limit, increasing the tax-free limit to £500,000.
Real Estate Agency Sales Fee
When selling their property, 95-97% of home sellers use a real estate agent to help with the sale.Most of these agents charge a percentage commission on a "no sale, no fee" basis - if the sale doesn't go through, no payment is required.
The average estate sale agent fee in the UK is usually around 1%-3% of the property price.
Transfer attorney fees
Just like when buying a property, you will also need to pay a portion of legal fees when selling the property.Some law firms charge a percentage of your home's value, and some charge a flat fee.
Legal fees are usually less expensive when selling a home than when buying it.The exact cost will depend on whether your property is freehold or leasehold and whether you have complex payment arrangements such as a mortgage.
