New property register could expose thousands of overseas homeowners

Jessica Nangle

January 19, 2021

property sales tax

A new register to identify foreign owners of UK property will come into effect in 2021 and is set to expose thousands of overseas investors and homeowners to the UK’s inheritance tax laws, according to life insurance specialist adviser John Lamb Hill Oldridge (JLHO).

The UK Department for Business, Energy & Industrial Strategy register is designed to ensure that details of buyers, be they British expatriates or overseas nationals, are captured in order to mitigate potential money laundering and tax avoidance activities.

The UK residential property market is a magnet for international investors yet many are unaware that the minute they sign the completion papers, they will be required to pay 40% of the value of the property to HMRC at the date of death.

Although Prime Central London property prices are at a 13-year low, the average London property price has increased by 67% since 2010.

Michelle Cartwright, associate director of JLHO, said: “This new register represents a step change in the UK approach to overseas property owners.

“Without proper life cover in place individuals and their families will find themselves with a hefty inheritance tax bill to pay.

“With UK government finances reeling from the cost of its COVID support measures, the authorities are likely to be paying close scrutiny to those on and off the register as part of its financial rebalancing.”

UK assets directly owned are subject to inheritance tax of 40% on death regardless of the owner’s country of residence, nationality or domicile.

Foreign investors used to typically hold their residential properties via offshore companies as an effective shelter against the tax.

However, since April 2017 this option has no longer been viable as the rules changed for those residential properties owned by a non-UK company.

An easy solution for international property investors in the UK residential property market is to purchase life insurance which pays out a lump sum on death providing the estate with sufficient money to pay the inheritance tax.

It also means the deceased’s children can keep the family’s property assets in the UK.

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