Holding Property in the UK: A Simple Guide to Ownership Structures

When purchasing property in the UK, individuals and companies have several options for how to hold that property. Each method has its own benefits and drawbacks, especially when it comes to tax efficiency and Capital Gains Tax (CGT). Here’s a simple guide to the most common ways to hold property in the UK:

1. Holding Property as an Individual

This is the most straightforward way to own property. As an individual, you buy the property in your name and have complete control over it.

Pros:

• Simplicity: It’s easy to manage and doesn’t involve setting up any complex structures.
• Personal Use: You can use the property for personal purposes, such as a family home.
• Capital Gains Tax (CGT) Exemptions: If the property is your main residence, you may be exempt from CGT when you sell it.

Cons:

• Higher Tax Rate: Any rental income you receive will be subject to income tax, which can be up to 45% for higher earners.
• CGT on Second Properties: If you sell a second home or investment property, you may face CGT at rates of 18% or 28%, depending on your income bracket.
• Inheritance Tax (IHT): The value of the property is included in your estate, which may lead to inheritance tax charges of up to 40%.

2. Holding Property through a Company

Many investors choose to purchase property through a limited company, particularly for buy-to-let investments.

Pros:

• Lower Corporate Tax Rates: Rental income is subject to corporation tax at 19%, which is lower than the top rates of income tax for individuals.
• Tax Deductible Expenses: Mortgage interest and other property-related expenses can often be fully deducted from rental income before tax.
• CGT Efficiency: When the company sells the property, any gain is taxed at the lower corporation tax rate, rather than the higher CGT rates for individuals.
• Limited Liability: Your personal assets are protected, as the property is owned by the company.

Cons:

• Dividend Tax: If you want to take profits out of the company, you’ll need to pay dividend tax, which can reach up to 39.35% for higher earners.
• Mortgage Challenges: Mortgages for companies can have stricter criteria, higher interest rates, and require larger deposits.
• Annual Compliance: Running a company involves additional costs and administrative burdens, such as filing annual accounts and company tax returns.

3. Holding Property through a Trust

Some individuals choose to hold property through a trust, particularly for estate planning purposes.

Pros:

• Inheritance Tax Efficiency: Trusts can be useful for managing inheritance tax, allowing you to pass property to beneficiaries in a tax-efficient manner.
• Asset Protection: Trusts offer a layer of protection for assets, potentially shielding them from creditors or divorce settlements.

Cons:

• Complexity: Trusts can be complicated to set up and manage, often requiring professional advice.
• CGT and Income Tax: Trusts are subject to CGT and income tax at rates similar to those for individuals, though some reliefs may apply.
• Ongoing Costs: There are ongoing administrative and legal costs associated with maintaining a trust.

Tax Efficiency and Capital Gains Tax (CGT)

Individuals: When you sell a property that is not your main residence, you may be liable for CGT. The rates are 18% for basic-rate taxpayers and 28% for higher-rate taxpayers. Main homes may qualify for Private Residence Relief, exempting them from CGT.

Companies: Companies pay corporation tax on any gains made from selling property, which is currently 19%, lower than the individual CGT rates. However, when profits are distributed as dividends, additional taxes apply.

How Sterling Stamp Can Assist

At Sterling Stamp Law, we provide expert legal and tax advice tailored to your individual needs, whether you are purchasing property as an individual, through a company, or via a trust. Our experienced team will guide you through the complexities of property law, help you navigate tax implications, and structure your property holding to maximise tax efficiency. With multilingual expertise in Arabic, English, and French, we cater to both local and international clients, ensuring your property investments are protected and optimised.

For personalised advice on property ownership and tax planning, contact us at info@sterlingstamp.com.

Conclusion

The way you hold property in the UK depends on your goals, tax situation, and whether the property is for personal use or investment. Holding property as an individual is simple, but potentially less tax-efficient for investment properties. Holding property through a company can reduce income and CGT burdens but comes with additional costs and complexities. Trusts offer estate planning benefits but are more complicated to set up and maintain.

It’s advisable to consult with a solicitor or tax advisor to determine the best structure for your property investment based on your individual circumstances.

Purchasing Property in the UK as a Non-Resident: Key Considerations and Financing Options

Purchasing property in the UK as a non-national or non-resident is a great investment opportunity, but securing financing can be complex. Lenders typically require larger deposits, higher interest rates, and additional documentation for non-residents.

Key Considerations

• Deposit Requirements: Non-residents usually need a deposit between 25% to 40% of the property’s value.
• Income Proof: Lenders will ask for proof of income (bank statements, tax returns) from your home country.
• Interest Rates: Rates may be higher due to perceived risks.
• Currency Risks: If you earn income in a foreign currency, currency fluctuations may impact repayments.

Financing Residential Property

• International Lenders: Some UK banks like HSBC and Barclays offer mortgages to non-residents.
• Offshore Banks: Offshore lenders in places like Jersey or Guernsey may provide financing options.
• Specialist Brokers: Brokers who specialize in non-resident clients can find suitable deals.

Financing Commercial Property

• Commercial Mortgages: UK banks or specialist lenders will require business plans and proof of rental income potential.
• Private Lenders: Offer more flexible terms but higher fees.

Challenges for Non-Residents

• Limited Access to Lenders: Not all UK lenders offer products to non-residents.
• Higher Deposits and Interest Rates: Lenders often charge more for non-residents to mitigate risks.

Tax and Legal Considerations

• Stamp Duty Land Tax (SDLT): Non-residents pay an additional 2% on top of standard rates.
• Capital Gains Tax (CGT): Non-residents are liable for CGT on UK property sales.
• Income Tax: Rental income is subject to UK income tax.

How Sterling Stamp Can Help

Sterling Stamp provides expert legal advice to non-resident buyers, guiding them through the mortgage process, tax implications, and compliance. We assist with both residential and commercial property investments, ensuring a smooth transaction. Contact us at info@sterlingstamp.com for more information.

Comment obtenir un financement pour un bien au Royaume-Uni en tant que non-résident

Acheter un bien au Royaume-Uni en tant que non-résident peut être complexe, car les banques demandent souvent un dépôt plus important et des taux d’intérêt plus élevés.

Points Clés

• Dépôt: En général, il faut un dépôt entre 25 % et 40 % de la valeur du bien.
• Preuve de revenu: Les banques exigent des documents tels que relevés bancaires ou déclarations fiscales.
• Taux d’intérêt: Ils peuvent être plus élevés pour les non-résidents.
• Risque de change: Si votre revenu est en devise étrangère, les fluctuations peuvent affecter vos remboursements.

Financer une propriété résidentielle

• Prêteurs internationaux: Des banques comme HSBC et Barclays proposent des prêts aux non-résidents.
• Banques offshore: Elles offrent des options flexibles pour les non-résidents.
• Courtiers spécialisés: Ils peuvent vous aider à trouver les meilleures offres.

Financer une propriété commerciale

• Prêts commerciaux: Les banques exigent souvent des plans d’affaires détaillés.
• Prêteurs privés: Ils sont plus flexibles mais imposent des frais plus élevés.

Considérations fiscales et légales

• Taxe de transaction: Une surtaxe de 2 % est appliquée pour les non-résidents.
• Impôt sur les plus-values: Les non-résidents sont soumis à l’impôt sur les plus-values lors de la vente.
• Impôt sur les revenus locatifs: Le revenu locatif est imposable au Royaume-Uni.

Comment Sterling Stamp peut vous aider

Sterling Stamp offre des conseils juridiques spécialisés pour aider les acheteurs non-résidents à obtenir un financement pour des biens résidentiels ou commerciaux. Nous garantissons une transaction fluide. Contactez-nous à info@sterlingstamp.com.

Purchasing a freehold in the UK offers full ownership of both the property and the land it stands on, providing long-term security and control. Unlike leasehold, where ownership is limited to a set number of years, a freehold grants indefinite rights to the property and eliminates ongoing costs like ground rent. Here’s a simplified guide to help you navigate the process.

Key Steps in Buying a Freehold:

Property Searches and Surveys: Conduct necessary property searches to uncover any legal or environmental issues. A survey ensures the property is structurally sound.
Conveyancing: A solicitor manages the legal side, including reviewing the title deeds and drafting contracts to ensure a smooth transfer of ownership.
Stamp Duty Land Tax (SDLT): SDLT applies to residential freehold property purchases over £250,000 (or £425,000 for first-time buyers). The tax is tiered, meaning that different portions of the property’s price are taxed at different rates.
Title Review: It’s crucial to ensure a clean title, meaning no disputes or claims exist over the property.
Completion: After exchanging contracts, ownership is transferred, and the property is officially yours.
Land Registry: Your solicitor registers the property under your name with the Land Registry, formalising your ownership.
Why Choose a Freehold?
Full Control: As the freeholder, you manage the property without concerns about lease expiry or restrictions from a landlord.
No Ground Rent: Freehold ownership eliminates the need to pay annual ground rent or service charges.
Maintenance Responsibilities: You’re responsible for all property maintenance, which can be a benefit or burden depending on the condition of the property.

Sterling Stamp Law’s Expertise

At Sterling Stamp Law, we offer expert guidance through the complexities of freehold purchases. Our multilingual team, fluent in Arabic, English, and French, is equipped to assist local and international clients. With a deep understanding of UK property law, we ensure your transaction is handled efficiently and with complete transparency.
For professional advice on purchasing a freehold, contact us at info@sterlingstamp.com

Purchasing a leasehold property in the UK means that you own the property for a fixed period of time, but not the land it stands on. The land remains owned by the freeholder, and you may have to pay ground rent or service charges. Leasehold ownership is common for flats, but it can apply to houses too. Here’s a simplified guide to help you navigate the process.
Key Steps in Buying a Leasehold:

Check the Length of the Lease: It’s essential to understand how many years are left on the lease. A shorter lease (below 80 years) can reduce the value of the property and make it harder to get a mortgage.
Service Charges and Ground Rent: Leaseholders typically pay annual service charges for maintenance and a ground rent to the freeholder. It’s crucial to check how much these fees are and whether they can increase.
Leasehold Restrictions: Leaseholders may be restricted in making major changes to the property. For example, renovations might require the freeholder’s permission.
Conveyancing: A solicitor will manage the legal aspects, including reviewing the lease terms and ensuring there are no legal issues affecting the property.
Stamp Duty Land Tax (SDLT): SDLT is payable on leasehold purchases where the premium exceeds £250,000. Additionally, a separate SDLT charge may apply to any annual rent exceeding £1,000.

Why Choose a Leasehold?

Lower Initial Costs: Leasehold properties, especially flats, tend to be more affordable than freehold properties.
Shared Maintenance: For flats, the freeholder typically manages the upkeep of common areas, reducing the burden on individual leaseholders.
Possible Extension or Purchase: Leaseholders can apply to extend their lease or buy the freehold, depending on the circumstances and agreement with the freeholder.

Sterling Stamp’s Expertise in Leasehold Purchases

At Sterling Stamp Law, we have extensive experience assisting clients with leasehold purchases. Our multilingual team, fluent in Arabic, English, and French, ensures effective communication with a diverse clientele. We provide expert legal guidance to help you understand lease terms, service charges, and any restrictions.
For professional advice on purchasing a leasehold property, contact us at info@sterlingstamp.com