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Expat landlords shrug off Budget changes

Written by Sam Jones on 30 July 2015.

With the UK property market remaining robust it is good to see so many expats looking to invest in the property market.

House price growth has been steady in the south-east and London while growing stronger in the rest of the country too.

Rents are rising strongly across all regions and landlords are diving into new property purchases creating a solid market.

It is why British expats are still as keen as ever to invest in a buy-to-let property back home, according to leading offshore lender Skipton International.

But there is a fly in the ointment.

The last Budget announcement has effectively introduced taxes rise on buy-to-lets given the cuts on the tax relief available to landlords. This has been readjusted to no more than the basic rate of income tax of 20% and away from their income tax band, which may have resulted in much larger reliefs being claimed.

The move will mainly impact large landlords - those who are likely to have a property portfolio as opposed to one or may be two rental units.

The cut will, over the next four years, see a reduction in the 40% or 45% relief. The maximum relief will instead be set at 20%.

Expat landlords would therefore have had to be receiving more than the current threshold of around £32,000 in rental and other UK taxable income to have qualified for the higher tax rate and therefore the relief, so many will not be effected.

The other budget change is that from next April landlords won’t be able to automatically claim 10% of the rent against wear-and-tear costs. They will however be able to deduct costs as they actually incur.

On top of that regulators such as the Bank of England have called for new powers to restrict buy to let lending for the first time. They rightly, in our view, want to stop the market overheating and the creation of a bubble that could pop.

Despite changes announced in the recent UK budget Skipton managing director, Jim Coupe says the bank is still receiving many inquiries from expats.

Skipton argues most expat landlords are not higher rate UK taxpayers but those who simply want to own their own property back home.

At Capital Fortune, we work with expats every day and there are a number of specialist concerns to consider if you do live abroad.

Many lenders require a UK postal address, which can be avoided by approaching specialist lenders who are expert in dealing with expat requests.

There are also currency concerns regarding fluctuations in foreign exchange rates which can have a giant affect on how much the loan costs to be repaid.

Some banks will also decline to lend in foreign currencies meaning the rate can be constantly changing.

It is a complex area and it is strongly suggested you seek specialist advice from us or a specialist expat broker before diving into currency speculation combined with mortgage lending.

But it could be a potentially good time to buy a property back home while you live abroad considering the strength of the economic fundamentals in UK property.

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