Rental Trends and Property Taxes in the UK for Investors

Table of Contents

Rental Trends And Property Taxes In The UK For Investors​

There had been a lot of questions going around the property rental trends in the UK and how effective the yield has been. The high-yield properties and buy-to-let properties are in the top discussion now and are rightly so because of the heavy returns they promise and deliver. The property market has shown a tremendous growth curve and more foreign investment is looking forward to laying their eyes here. The property mortgages in the UK are done for buying both residential and commercial properties and the government with their flexible tax changes are encouraging more investment ever since the past decade. The year 2020 held uncertainty for the property investments but the market surprisingly remained resilient. The buy-to-let properties reached a whopping demand of 2.7m in 2020. Tax changes were always not very accommodative but foreign investments always found out ways to adapt to the changes. So here let’s understand how UK property investments are done by foreign investors and how are they benefitted.

property taxes in uk

UK banks give the best investment property mortgage rates through two main mortgage types, namely:

  • Residential mortgage- These are given to procure properties for inhabiting them yourselves. The entire set of rules is different from those of investors.

  • Investment mortgage- These are given to investors looking out to rent their properties. Here the bank is interested in the initial capital of the investor and the taxes are calculated likewise. This also depends on the rental returns an investor is likely to receive. The bank here is assigned to acknowledge if the property is going to pool in the necessary funds.

The process of mortgage lending

  • The Head of Terms is a prior approval that needs to be acquired. The investor documents are assessed by the bank in this stage and they discuss the possible distribution of payments.
  • After the completion, the investor needs to submit complete documentation.
  • The next stage involves the bank credit committee to consider the application and grant the mortgage.
  • The bank and the investor’s solicitor prepare the necessary paperwork.
  • The confirmation leads to the transfer of the funds from the bank.

The costs to be incurred

The buy-to-let property taxes are calculated based on the borrowing amount and the return graph. The rest of the costs that will be incurred are given below:

  • 750-3000 Euros for professional property valuation and surveys. This is the cost for London and an independent evaluator will be nominated by the bank.
  • The rebuilding and insured content costs will be depending on the property acquired and its condition for refurbishing.
  • 995 Euros to 1.5% of the mortgage amount will be incurred as a bank administrative fee for the application process and mortgage loan grant.
  • 3000 to 5600 Euros for legal services.
  • 0.5-1% of the mortgage amount will go as a mortgage broker fee.

The UK property taxes for foreigners are ever dynamic so have a clear knowledge before you seek out to invest. We are listing out a few important tips that you might want to keep handy before investing.

  • A prior clear and transparent credit history will help you get a loan faster.
  • Prepare all documents beforehand and manage to acquire as many references as possible for all of your income sources.
  • Get your mortgage application checked by experts for guidance and advice.

There are high chances of getting the best investment property mortgage rates for foreigners owing to the impressive rental returns on the buy-to-let properties in the UK. But what are those properties and why are they beneficial to you?

Buy-to-let properties are the ones that you buy to rent out instead of inhabiting it yourself. There is a separate demand for these investments and have higher interest rates as compared to others. They are heavily high yield returning and give a solid rental flow. The buy-to-let property taxes vary from normal investments and are a good shot to start with. Let us check out the benefits they bring along.

  • Most areas of the UK are heavily expensive and hence families and individuals prefer living in rented properties. This gives an ample growth space to the market where the investors can freely invest in the same.
  • The lower property mortgage interest rates are encouraging more foreign investments to take the demand forward.
  • Capital growth if kept in mind as long-term goals expand exponentially with this investment. The rental yield every month is also a good boost where steadiness is achieved just within a few months.
  • The mortgage expenses will not be deducted from your rental incomes to reduce tax bills. This is a relief provided by the government.
  • The property resell value is going to get immensely high if you have a great location to sell-off the property. The capital gained will be impressively higher.

But despite the rosier pictures, you must know the reality of the investment. The reality is not gloomier but the tax scenarios are something that can land you into trouble if you aren’t having the right knowledge.

  • Property rental trends in the UK are on a path of shift. Asian investors are investing heavily in the market and interest rates for Hong Kong buyers are expected to witness a surge in 2021. The British National Overseas is opening to special visas and this is also going to pave an influx in demand owing to surging citizenship. The entire UK will still be a safer ground to play as the currency will still be weaker to others. This deficit is what is encouraging more overseas investment. An added 2% stamp duty is going to get levied upon for foreign-based investors from April. But this addition is hardly going to affect the opportunities that foreign investors are seeing forward to.
  • The COVID-19 has taken a toll on the public finances. The tax changes are predicted to hit into action real soon. Hence the buying habits of investors are going to change too. The capital gains tax will witness a great overhaul and if capital-gains tax is going to get higher, then the entire investment pattern will change.
  • Despite a lot of these factors, renting houses will still be in the demand. The rental market performed pretty well throughout the entire 2020 and at certain points throughout the year, the demands were seen to rise above 20% as compared to 2019. This has been a hot demand which is set to surge even in 2021. Job uncertainty does not let people buy properties and hence their high dependence on rents.
  • The demands of homebuyers are also changing. Tenants are looking for better amenities like larger property space, great outdoor space, or good internet connectivity. This is what has made investors acquire just these pieces to rent at greater returns. Lucrative amenities attract good capital returns for investors.

The market is growing enormously sitting at this stage of pandemic. The past year though had been pretty uncertain yet had proven bright results. These statistics are not going to daunt the newer investments that are lined in for this year. Though there had been some discrepancies in property taxes for foreigners, the brighter future is going to provide you with a buffer to level out the risks. It is at this stage that you as an investor must take calculated risks and take steps that are not going to make you regret them later. Good backed-up research is going to help you gain good capital returns and a steady return income that is going to serve as a repayment avenue for your mortgage. At this level, you need to have a clear idea of a few particular aspects:

  • The know-how about the property that you are going to acquire through the mortgage and loan.
  • The repayment structure needs to get cleared out before you are going out for the property purchase.
  • The property area which you are eyeing. This will in detail liberate the fact if your investment has a good future or otherwise. This step is pretty important and needs to proceed with greater concerns.
  • The target audience which you are eyeing to rent your property to. Their demographics, age, occupation, income, and lifestyle are going to be the determinant factors if your return is going to be a fruitful one.
  • The amenities that your property is surrounding you with will increase the property’s demand. The nearby schools, hospitals, shopping complexes, good transportation, and office hubs surely surge a property’s demand and value both.
  • The growth of the area in near future is going to help you get an idea of the future resale value of the property. If the area is growing and so is the infrastructure, rest assured you are going to hit a good value. But if the area is slowly dying and people are migrating out, then stay away from such purchases.

Investments overseas take a lot of time, money, and energy from you as well as your investment team. Make sure that the steps you are taking are calculated and do not involve immediate risks. You do not want to immediately resell a recently bought property that didn’t even pool up the capital for your next purchase.  

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Your email address will not be published. Required fields are marked *

Fabrizio Cravero

Fabrizio Cravero

UK Property investor

Fabrizio is sharing his knowledge about investing in UK properties from overseas. He is based in Hong Kong and provides weekly guidance to his followers.

My Personal Favorites
Join The Free Masterclass

Free Property Webinar


Make Sure Your Audio Is Turned ON!

  • The Most Lucrative And Attractive 22 City Guides Completely Free
  • I Reveal The Economy, Employment, Government Regeneration Scheme and the House Market Overview
  • SPECIAL BONUS: Average House Price, Average Yield And The Price Growth In The Past 5 Years. (Plus on going LATEST NEWS)

Get your 22 city guides. FREE instant download

Explore Where To Invest And Get The Highest Return In under 2 minutes!

Your privacy is protected. We don’t spam! Ever

22 city guides

Already downloaded over hundred times!

bell icon

This website uses cookies to ensure you get the best experience on our website.

Success! One last step...

We’ll send your FREE GUIDES in a few minutes.

  • Keep an eye in your inbox (contain the FREE GUIDE LINK) 
  • If you are super excited to have IMMEDIATE ACCESS AND START EXPLORING then click the button below 
22 city guides