UNITED KINGDOM RESIDENTIAL PROPERTY - INVESTMENT GUIDE (2020 EDITION) - DWG
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UNITED KINGDOM
RESIDENTIAL PROPERTY
INVESTMENT GUIDE
(2020 EDITION)
CONTENTS Introduction 5 Ownership Types 7 Building Warranties 7 Purchasing your Property 9 Purchasing Cost 10 Holding Costs 10 Letting Costs 11 Disposal Costs 11
United Kingdom Residential Property Investment Guide (2020 Edition) 4
INTRODUCTION
The United Kingdom (UK) is seen by many investors to be one
of the world’s leading places to invest in. This guide aims to help
investors have a basic understanding of the purchasing process
of UK properties, and what property ownership in the UK entails.
Whilst every effort has been taken to ensure the accuracy of this
guide, and we aim to address most issues regarding property
ownership in the UK, it is not meant to replace the professional
advice of solicitors, accountants, tax advisors, or other professionals.
Should investors wish, they may decide to purchase their investments
through DWG in order to gain access to its network of investment
partners, allowing for a simplified and guided journey.
Any enquiries regarding DWG or its current projects
can be emailed to info@dwg.com.sg
Thank you.
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United Kingdom Residential Property Investment Guide (2020 Edition)
OWNERSHIP TYPES
In the UK, titles of ownership refer to the legal rights an owner has in a property. The two
most important titles which properties are commonly registered under are Freehold, and
Leasehold titles.
FREEHOLD TITLE
A Freehold title refers to the ownership of Land and all immovable objects
attached to them. Such a title will last for an infinite amount of time and will give
an owner to the most control over the land and structures. However, owners of
freehold titles are still subject to certain covenants. This type of title is typical for
most landed properties.
LEASEHOLD TITLE
A Leasehold title refers to a temporary right of ownership to a property and
may be granted out of a freehold estate. Owners of leasehold titles typically
pay a ground rent and management charge to the landlord, but their rights are
protected by English law. Leasehold titles are typically sold for 99, 125, 250,
or 999 years, although these can be extended subject to certain conditions and
additional fees.
BUILDING WARRANTIES
Some new-build and off-plan properties in the UK may be covered by a ten-year
building warranty covering against structural defects should they arise in the first
10 years following the completion of the property.
During the first 2 years of such warranties, builders are typically responsible for
correcting any defects or damages that may arise from failures to comply with
standards set by the organization providing the warranty.
For the remaining tenure, the warranty provides insurance to cover the cost of
correcting any damages caused by defects in specified parts of the home.
Building warranties may or may not come with deposit protections which would
protect the exchange deposits should the developer become insolvent.
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United Kingdom Residential Property Investment Guide (2020 Edition)
PURCHASING YOUR
PROPERTY
The property purchase process is started when there has been an in-principle agreement
between a buyer and a seller, for the buyer to purchase a specified property.
An example of this would be the signing of a reservation form in order to reserve a unit in a
specified development.
Once this has been agreed, the buyer would need to appoint a solicitor to commence the
conveyancing process. The solicitor will prepare a legal report on the property, and will have
to undertake full due diligence on the property including:
• Ensuring that the title of the property is free from any outstanding issues
• Conducting local searches to determine if there are any conditions attached to the property
• Ensuring that the property has approval for all the relevant planning consents
• Ensuring that there are no issues with rights of way to the property
The solicitor will also need to ensure that the buyer’s source of funds are in compliance with
existing Anti-Money Laundering (AML) laws. Buyers may need to furnish solicitors with
additional documents as instructed.
Once the due diligence has been completed to the solicitor’s satisfaction, and the buyer
has executed the necessary documents according to the solicitor’s instructions, the buyer’s
solicitor will “exchange contracts” with the seller’s solicitor. The buyer’s solicitor will also
release the funds paid for exchange to the seller’s solicitor. It is at this point which both
parties are legally committed to honour the transaction.
Completion will take place on an agreed date after the exchange. Properties still
under construction will not complete until the property has been deemed fit for occupation.
Upon completion, buyers will have to pay any balance due for the purchase.
1 2 3 4 5
Agreement Due Diligence Anti-Money Exchange Completion
to Purchase of Property Laundering of Contracts
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United Kingdom Residential Property Investment Guide (2020 Edition)
PURCHASING COST
- S TA M P D U T Y L A N D TA X ( S D LT )
Foreign buyers who wish to purchase property in the UK will have to pay a stamp
duty land tax on their purchase. It is a tax paid by the buyer and calculated
based on the value of the property. As of 1st April 2020, The SDLT rates can be
summarised as below:
STAMP DUTY LAND TAX (FOR INDIVIDUALS & COMPANIES WITH RENTAL
PROPERTY)¹/² (Residential Properties)*
BAND STANDARD RATE* WITH 3% SURCHARGE*²
£0 - £125,000 0% 3%
£125,001 - £250,000 2% 5%
£250,001 - £925,000 5% 8%
£925,001 - £1.5m 10% 13%
£1.5m+ 12% 15%
*For residential property, an additional 2% surcharge to apply to non-UK resident individual and company investors
from 1 April 2021 for those who exchange contracts after 10 March 2020 and complete after 1 April 2021
*Figures in this table are provided by Adams & Moore, a UK audit, tax, and advisory firm that DWG partners with for
clients requiring such services and advisory.
HOLDING COSTS
Ground Rents are paid by owners of a leasehold property and the amount to
be paid is stated in the lease. These amounts vary depending on the amount
charged by the freeholder, but is typically around 0.1% of the purchase price per
year depending on the type of property.
Service Charges vary depending on the level of facilities in the development.
¹ SDLT Rates applicable for single purchases of property by individuals only. Please ask for further details on multiple purchases and company purchases.
² A 3% SDLT surcharge can apply for purchases of second homes when not replacing your main residence. Please ask for further details.
³ Not all non-UK residents are entitled to the personal allowance. Companies do not receive tax free allowances.
4
Basic rate band for individuals is reduced by other taxable income subject to income tax. Please ask for further details.
5
From 1 April 2017, IHT applies to non-UK residents to hold UK property via non-UK companies or trusts. Please ask for further details.
10United Kingdom Residential Property Investment Guide (2020 Edition)
LETTING COSTS
Lettings & Management fees will have to be paid if you intend to engage a
lettings and management agent to handle this on your behalf. The fees vary from
agent to agent, as well as the level of service engaged. Saint Andrews Bureau
(SAB) is one such partner that DWG recommends investors can work with for
investments in Cambridge. For full management of the unit, they charge a fee of
12% of the rent collected per month plus VAT.
Income Tax is also an important factor to take note of when you earn rental
income. A summary of income tax brackets can be found below (accurate as of
1st April 2020).
INCOME TAX (FOR INDIVIDUALS + COMPANIES)³
BAND TAXABLE INCOME TAXABLE INCOME TAX RATE
With Tax-free Allowance Without Tax-free Allowance
Personal Allowance £0 - £12,500 N/A 0%
Basic Rate Band £12,501 - £50,000 £0 - £37,500 20%
Higher Rate Band £50,001 - £150,000 £37,501 - £150,000 40%
Additional Rate Band £150,000+ £150,000+ 45%
Company (UK or non-UK) N/A £1+ 19%
*Figures in this table are provided by Adams & Moore, a UK audit, tax, and advisory firm that DWG partners with for
clients requiring such services and advisory.
DISPOSAL COSTS
Capital Gains Tax is a tax payable on any profit made from the sale of a
property. A summary of capital gains tax brackets can be found below (accurate
as of 1st April 2020).
CAPITAL GAINS TAX (FOR INDIVIDUALS AND COMPANIES)4/5
BAND GAIN UP TO TAX RATE
Personal Allowance £0 - £12,300 0%
Basic Rate Band £12,301 - £49,500 18%
Higher Rate Band £49,500+ 28%
Company (UK or non-UK) £1+ 19%
*Figures in this table are provided by Adams & Moore, a UK audit, tax, and advisory firm that DWG partners with for
clients requiring such services and advisory.
Inheritance Tax is generally paid on estate of assets worth £385,000 or more. A
tax of 40% is levied on amounts higher than the threshold. There is also usually no
need to pay for inheritance tax if you leave everything to your spouse or civil partner.
¹ SDLT Rates applicable for single purchases of property by individuals only. Please ask for further details on multiple purchases and company purchases.
² A 3% SDLT surcharge can apply for purchases of second homes when not replacing your main residence. Please ask for further details.
³ Not all non-UK residents are entitled to the personal allowance. Companies do not receive tax free allowances.
4
Basic rate band for individuals is reduced by other taxable income subject to income tax. Please ask for further details.
5
From 1 April 2017, IHT applies to non-UK residents to hold UK property via non-UK companies or trusts. Please ask for further details.
11A R E Y O U R E A D Y T O
START YOUR
UNITED KINGDOM INVESTMENT
JOURNEY?
Contact us to start a rewarding and simplified investment experience!
DWG International : info@dwg.com.sg
This document has been prepared by DWG for advertising and general information only. DWG does not guarantee, warrant or represent that the information contained in this document is correct.
Any interested party should undertake their own inquires as to the accuracy of the information. DWG excludes unequivocally all inferred or implied terms, conditions and warranties arising out of
this document and excludes all liability for loss and damages arising there from. Purchasers are advised to conduct their own due diligence and are informed that, as in any investment, commercial
risks are involved. • All forms of investment carry risks, including the risk of losing all the invested amount. Such activities may not be suitable for everyone. • This is an overseas investment. As
overseas investments carry additional financial, regulatory and legal risks, investors are advised to do the necessary checks and research on the investment beforehand. • The government of the
property stated here-in imposes certain restrictions on foreign ownership of properties. Buyers will need to fulfil criteria before being able to purchase. DWG is a real estate investment company
which owns foreign properties through its various subsidiaries, and co-invests with property developers as joint venture partner.You can also read
