You’ve made the momentous decision to move abroad. The number one question next
on the agenda must be whether to sell or let your property in the UK. Should you cut all
ties and use the money from your property to fund your new lifestyle overseas or is it
better to keep a link back home and hold on to your property if you ever want to
It can seem attractive to sell your property in the UK, if you can do so quickly, meaning
you can pay off the mortgage and potentially have some money left at your disposal.
It also shows you are fully committed to the move abroad.
In the good old days, when the property market in Britain was buoyant, there was less
of a risk involved in selling up and shipping out. The fact that people could often sell
their home for more than they bought it for, release the equity and move overseas to a
more affordable lifestyle meant that they didn’t really think twice about expatriating.
However, some people then found themselves stuck overseas in a lifestyle they could
no longer afford or trapped because they could not afford to return. They then
admitted that they wished they had taken more time and researched their new life
options more carefully before they moved.
With speculation that property prices may drop as a result of ‘Brexit,’ it could feel a
smart move in the long run to sell up if you’re moving overseas. However, it would also
seem far too early to tell especially, as Article 50 will not be triggered until next year.
Many people, however, prefer the safety net of keeping their property in the UK and
letting it out. This does at least give you a chance of settling into your new lifestyle and
taking stock – after all, you can always sell later.
It gives you time to see whether you have chosen the right location for your relocation.
You know you have not burnt all your bridges and i f you suddenly realise that after six
months or a year that your new nation is not to your liking, you can move back without
the hassle of finding somewhere to live.
It’s also a good way of earning enough to repay the mortgage repayments on a
property abroad. This can provide income, give you a base to return to and make it
easier to obtain further mortgages later on.
One drawback is that dealing with tenants and maintenance issues can be stressful and
time consuming. We’ve all heard of nightmare tenant scenarios, added to which you’ll
be dealing with any issues from afar and from a different time zone. For this reason, it
can often make sense to put an agency in charge, although be prepared to pay letting
and management fees from about 12 per cent to 15 per cent.
Some financial considerations
If you do decide to keep your property in the UK, you must inform your mortgage
provider and state if it will be rented or remain empty. If you decide to let out your
home, you will need to obtain their consent, so as not to breach the terms and
conditions of your loan. Make sure your lender doesn’t try to hike up your interest rate
(due to the fact you’re no longer on a residential interest rate) Your insurers will also
need to be informed so factor in the additional cost of a landlord insurance policy.
While tax depends on your personal situation, there are general considerations
affecting all UK property landlords. Income tax will be charged on any rental income
above the personal allowance (and it is worth noting that not everyone is entitled to
this allowance as it varies from country to country). If you’re receiving rental income on
the property and are classified as a non-resident, you will be obliged to deduct the
basic rate of income tax at 20%. If you use a letting agent to manage your property for
you however, they will take care of this and deduct the 20% from the ‘net rent’. There
are certain circumstances where you may be entitled to claim tax relief on this income.
Be aware that any rental income is likely to be paid in sterling to a UK account, so as an
expat landlord you may need to transfer the money into your local currency each
month. Currency specialists can offer contracts that protect you from potentially
volatile fluctuations in currencies from month to month.
If you are a British citizen and you plan on selling your property to move abroad, you
should not have to pay any Capital Gains Tax, if you are able to satisfy certain criteria.
However, although you won’t pay CGT on your main residence at this point, you will
probably pay CGT if you let it out and sell it further down the line. If you cannot prove
that the property that you are selling was your main home, it is also likely that you will
be eligible to pay. If you are classed as a non-resident selling a UK residential property,
you may need to pay CGT, at 18% or 28% depending on what rate of tax you pay.
There may also be tax implications that you may incur for selling such a property whilst
living in your new host country. Double taxation treaties may be applicable, so ensure
that you check this for any such liabilities. Another factor to consider is that if you sell
in the UK, buy property abroad and then return to buy in the UK, you will be subject to
an additional 3% stamp duty if you retain your property abroad.
Whatever you decide, it’s important not to rush into the matter. Cross Border Financial
Planning are experienced in all areas of expatriation, so if you would like to discuss
what is best for your particular circumstances, do get in touch.