Capital Gains Tax

Valuations for Overseas Property Owners & Expats

The new Capital Gains Tax which will be enforced from 6 April 2015 will greatly impact on the gains made by non-UK residents in the residential property market. From April, any gains made from the sales and lettings of residential property will now be taxed at either 18% or 28%. This change will also apply to UK expats selling properties while based overseas.

What we do

At City Quays, we understand that this a crucial time for all foreign investors. However, with our team of professional valuers, the new Capital Gains Tax is not all that scary as there are ways around it if expat property owners act now, such as the Principal Private Residence relief (PPR). To find out more on how we can help, read our guide on Capital Gains Tax or contact us now.

Valuations for tax purposes, whether its inheritance tax or Capital Gains Tax, are more complex and is a specialist area where local expertise and experience are critical. As one of the leading independent agency in London SE16, our professional valuations are strongly built on evidence, interpretation and negotiation, which are imperative when dealing with the HM inspector of Taxes.

Only the amount of overall gain after 5 April 2015 is chargeable to tax, which can be calculated by establishing the property value as of 5 April (known as 'rebasing'), and then calculating the amount of gain over that value. Alternatively, you can divide the whole gain on the basis of the time you held the property after 5 April compared to the total time you've owned it. This date you will minimise the loss that you will incur. We are experts in our field and can give you a valuation on your property with speed and efficiency, in time to save you a lot of money.

The aim of all of this is to help raise money for the Treasury, and maybe cool the constant rising property market in London. Also in order to close a tax advantage where overseas investors are treated more favourably from a tax perspective than British based landlords, but this is where we can help!

How We Can Help?

In order to get the least amount of capital gains tax you need to get an expert valuation on your property before April 6 2015, so that you are paying only on the amount it has gained from that point and not from the price it was valued at six months or a year ago when you bought it or last had it valued. We are experts in this field and can help you to greatly lessen the negative affect this new legislation will have on the profits you will gain from your properties in the UK.

At City Quays we have a team of recognised experts in property valuation, we can provide a comprehensive service to get your property valued at the current market value and help save you what could be a lot of money. You will need to make sure your property is valuated at market value before April 6th 2015 so get in touch and we can help.

Market value is a concept separate from market price, which is "the price at which one can transact", while market value is "the true underlying value" according to theoretical standards. The concept most commonly happens in an inefficient market where prevailing market prices are not reflective of true underlying market value. For market price to equal market value, the market must have efficient levels of information and rational expectations must prevail. So the Valuation Expert also will be looking for conditions that render the disposal price above market value, such conditions could be 'a special purchaser' a 'merger of land interests' or just temporary market overheating or temporary shortage of supply.

We are best placed to get you the correct Market value to minimise the losses on your investment property, call us before 6th April 2015 to get an expert valuation.

What else has changed?

There are also things out there to help you get around these changes to capital gains tax such as Principal Private Residence (PPR) relief which in some circumstances may still be available.

To wrap it up

The Capital's property Market is still a very attractive prospect to overseas investors looking for a safe haven for their cash, with average prices rising between 10 - 15% over the past 12 months.

Don't let these changes deter you, let us help you lessen the losses by contacting us as soon as possible to give you a quick professional and expect valuation on your properties. We have vast experience and

knowledge of the property market in London.

ALSO check out our page about the new changes to and rules regarding Stamp Duty Land Tax and how this will effect you on the left hand menu.

Capital Gains Guide

The service we provide - valuations

For a fixed fee of £99.00, we will do a desk top valuation using our market leading industry valuation tools, provide you with an indepth report illustrating sold figures in chart form and statistical information regarding your area.

You will get a valuation letter from one of our trained valuers backed up by a Rightmove report showing sold prices and a home track report which all RICS (royal institute ) valuers use. We aim to provide all our valuations within 72 hours, delivered in a pdf by email.

How we do it

For a fixed fee of £99.00, our professional valuations team will carry out a desk top valuation using the leading valuation tools in the industry, and provide you with an in-depth report. illustrating sold figures in chart form and statistical information regarding your area.

You will get a valuation letter from one of our trained valuers backed up by a Rightmove report showing sold prices and a home track report which all RICS (royal institute ) valuers use. We aim to provide all our valuations within 72 hours, delivered in a pdf by email.

Contact us

For valuations before the Capital Gains Tax reform, please complete the form here or contact us on 020 7231 2957.

Property owners that are Non UK residence or Expats need to act now to avoid Capital Gains Tax

The New Legislation

Here at City Quays we want to help all those that will be affected by the new changes to capital gains tax. This new legislation will largely affect expat and non UK residence property owners starting from early April 2015 onwards.

The new capital gains tax, which will be implemented very soon, states that all overseas persons that own a residential property in the UK will now be taxed on any gains made from the sale of that property. The new law will also include all residential property that is rented out. This change will scare a lot of investors but once you understand how it works it is not all bad, there are ways around it and also we can help to ease the pain a little, all is explained below.

This will affect many foreign investors and UK expats who have property in this country, including those who were hoping to sell this property before returning home. Now all of these people will need to pay capital gains tax, however, there is good news, being that any gains are calculated only from the value of that property on April 6 2015. This change in the Law will only apply to future increases in value and not previous growth.

Private Residence Relief (PPR)

Relief means that anybody living in the UK who sold their principal private residence is exempt from paying capital gains tax. Meaning that if you are a UK expat holding residential property you might be able to get around this by continuing to hold the property until returning to the UK, then living in it and selling it claiming exemption from capital gains tax because it is, or was, your main home.

Before this new legislation it was required that this PPR property was the owner's only principal residence in the whole of the world and not just in the UK, this meant that the owner had to be a UK resident. However the good news is that this is all set to change with this new legislation, with this new law to get PPR relief, the owner (non UK resident) of a UK property needs now only show that they have spent at least 90 days in the property for each year, for it to be considered their PPR. Also the 90 days can even be split between husband and wife. The PPR property now only has to be their main residence in the UK and the rest of the world.

All of this applies to properties held in individual names. Those properties are subject to UK inheritance tax at 40 per cent. Due to this a lot of foreign domiciled individuals normally obtain UK properties through companies which would allow them to avoid this 40 per cent charge. However, this is now less attractive with the introduction of the annual tax on enveloped dwellings (ATED) charge imposed on the company each year. As a consequence trusts are now increasingly used by foreign domiciles to hold UK property. In many cases a trust will qualify for the exemption from the new capital gains tax charge where PPR can be claimed.

Non UK residence and expats who have been outside the country for five years can sell their property between now and April 6 this year without incurring capital gains tax. After this date capital gains tax will apply unless they live in the property for at least 90 days for each year thereafter. Obviously this will prevent the property from being rented out other than for short periods. Or they wait until they return to the UK, live in the property and then sell which would provide partial PPR relief.

Alternative Options

Another option for foreign investors and expats who are foreign domiciled might be to sell the property to a trust now. This would trigger a stamp duty land tax (SDLT) charge but would not cause a capital gains tax problem. The trust would qualify for PPR if a beneficiary met the 90-day test for each year of ownership by the trust. Or the property could be transferred to a Qualifying Non UK Pension Scheme (QNUPS).

A QNUPS is a multi-member pension scheme which should fall outside the general charge to capital gains tax when it is introduced next April. It is also outside the scope of all the ATED charges. And the property should also be outside the scope of UK inheritance tax. It is likely to be particularly useful where property is rented out and PPR will thus not apply.

Stamp Duty Land Tax

What is Stamp Duty?

Stamp duty or Stamp Duty Land Tax (SDLT) as it is formally known as, is a tax charged on all land and property transactions in the UK. Anyone buying a property or land will pay a tax rate depending on the purchase price and the property type.

The Old Stamp Duty

The previous Stamp Duty, known as the slab system, is charged on the ENTIRE purchase price. This meant that there were sudden increases in stamp duty once the price went above the next threshold. The Stamp Duty reform now means that 98% of homeowners in England and Wales pay less and only transactions worth more than £937,000 will pay more in tax.

Purchase Price	Stamp Duty Rate
Up to £125,000	0%
£125,000 - £250,000	1%
£250,000 - £500,0000	3%
Over £500,000	4%

Under the old system, if you purchased a property for £250,000 you would have been charged 1% in Stamp Duty which equates to £2,500. However, if the price was £1 more, the stamp duty rate of 3% would have been charged on the total purchase price, an extra £5,000 which totals a bill of £7,500!

How much will we save?

Example property	Stamp Duty	Change
£125,000	No stamp duty
Average help to buy home £185,000	Old rules: £1850 New rules: £1200	Saving: £650 Effective tax rate: 0.7%
Average family home £275,000	Old rules: £8,250 New rules: £3,750	Saving: £4,500 Effective tax rate: 1.4%
Average London home £510,000	Old rules: £20,400 New rules: £15,500	Saving: £4,900 Effective tax rate: 3.0%
£937,500	Old rules: £37,500 New rules: £37,500	Saving: No change Effective tax rate: 4.0%
£2,100,000	Old rules: £147,500 New rules: £165,750	Increase: £18,750 Effective tax rate: 7.9%

How the new Stamp Duty is different

The new and reformed Stamp Duty is now more progressive, and will only apply to the amount of the purchase price that falls within the particular duty band. This means, you will only pay the rate for the proportion of the property that is above the threshold. It is similar to income tax, and although the percentage rates appear higher on some tax bands, the overall charge will mostly be lower.

New Stamp Duty Rates

Purchase Price	Stamp Duty Rate
Up to £125,000	0%
£125,000 - £250,000	2%
£250,000 - £925,0000	5%
£925,000 - £1,500,000	10%
Over £1,500,000	12%

Under the new system, we'll use the same example as before. If you purchased a property for £250,000 you pay nothing for the first £125,000, however a 2% rate will be charged between £125,000 and £250,000 which equates to £2,500.

If you buy a property for £300,000, the 5% will only apply to the difference between £250,000 and £300,000. This 5% equates to a bill of £2,500, plus the previous 2% rate, for a total bill of £5,000

Why do we have to pay it?

When you buy a property, the change in land ownership has to be legally registered at the Land Registry. This process requires a certificate from HMRC - which will only be issued on receipt of the Stamp Duty Land Tax due on the purchase of the property. So, if you don't pay the Stamp Duty, you can't buy your new home.

Luckily, that's one of the things your solicitor takes care of so you don't have to!