I’m Emigrating, Should I Sell My Property?
There are many reasons why people decide to emigrate, including pursuing employment opportunities, moving closer to family or fulfilling a lifetime dream to live abroad. However, one of the biggest decisions homeowners face is what to do with their property when they move abroad.
Although emigrating can be stressful, deciding what to do with your UK assets doesn’t have to be difficult. This post looks at the factors you need to consider when deciding whether to rent or sell your property, including the advantages, disadvantages and tax implications of each.
Should you sell or rent your house when moving abroad?
When emigrating, many people prefer to keep their primary home and rent it out to generate an income. While this simultaneously ensures you have a home to return to and allows you to capitalise on the property market, any profit you make above the personal allowance level will be considered a taxable UK income.
If you choose to rent out your home, you have to decide whether you’ll manage the home yourself from abroad, rely on family or find a property management agency. Agencies can be expensive, generally charging fees of between 10% and 15% of your rental income over the year. Although you’ll save costs doing it yourself, you’ll have to be mindful of how your tax residence status could change if you need to return to the UK often to manage your property.
For most, selling up and moving abroad is appealing because it is a fresh start. Selling before you emigrate allows you to release the equity tied up in your property, which you can then use to buy a house abroad or assist with your relocation costs. Other factors to consider when deciding whether to sell or rent your house include:
- Mortgage repayments: If you’re planning to rent your property while you’re abroad, you have to secure a buy-to-let mortgage. Due to the high risk associated with renting, including tenant turnover and potential vacancy periods, buy-to-let mortgages tend to have much higher fees and interest rates than ordinary contracts.
- Probate: It is straightforward to administer an estate and resolve tax issues when the deceased and their assets are located in the same country. A person can only be domiciled in one country at any given time, so after your death the value of your estate and assets are calculated according to where you resided. If you’re renting a home but living abroad, your next of kin will have to obtain an expensive and time-consuming grant of probate to consolidate your assets before any inheritance can be released and they can sell the inherited property.
- Budgeting: From finding a property in your new host country to hiring an international moving company, emigrating is an expensive process. It’s important to work out whether the income you’ll receive from renting can cover the property management costs, mortgage interest and estate agent fees.
- Insurance: If you’re selling up and moving abroad, you must protect your vacated property with unoccupied house insurance. If your home is unoccupied for more than thirty consecutive days, your standard household insurance policy no longer covers it. As your property is standing empty for an extended period of time, it is more vulnerable to theft and electrical fires and floods will go unattended. You may be able to lower your insurance premiums if you have installed additional security measures, such as burglar alarms or padlocks.
Tax Implications when emigrating
Another important factor to consider when deciding whether to sell or rent your property is the tax implications.
If you retain your property in the UK while living abroad, any income you make from renting over the personal allowance of £11,500 will be subject to 20% tax. Britain has ‘double taxation agreements’ with many countries, which is popular with expatriates; in effect, you don’t pay tax on the same income. If the tax rates differ between the UK and your host country, you’ll pay the higher rate.
You’ll also be liable to pay capital gains tax collected on the profit you make from selling or renting your UK property. Capital gains tax is the tax levied on any profit made from the sale of an asset, unless it falls below the annual capital gains allowance of £11,700. If you’re considering selling up and moving abroad, you don’t have to pay capital gains tax on your property if:
- It was used primarily as your main home and not as a way of making profit.
- It was your main home for the time you owned it.
- It was only used by you, your family and no more than one lodger throughout the period of ownership.
- The total area of land that comes with the house doesn’t exceed 5,000 square metres, including the part of land that the house is built on.
If you emigrate before selling, you have to be a non-resident for a minimum of five complete tax years before you can dispose of any profitable assets without being taxed. Even though you may be deemed a non-resident for income tax purposes during these five years, you’ll be treated as only a temporary non-resident for capital gains tax.
If you acquired the property after you left the UK then any profit you make is not subject to capital gains tax, but may be taxable in your host country. If you return to the UK within five years of moving abroad, you may have to pay tax on the income or gains you made while you were a non-resident.
Those who emigrate but choose to retain their property will be subject to a 40% inheritance tax levied on any UK assets after their death. If the value of your estate is below the £325,000 threshold or you leave everything to your spouse, you won’t be subject to inheritance tax.
If you have monitored the UK property market and decided that you can meet the costs of renting out your home while living abroad, keeping your property can be a good long-term investment. However, if you’re put off by the costs and tax implications associated with retaining assets in the UK, the best option may a quick house sale through Good Move.
If you’re looking to sell up, release equity and move abroad fast, contact the experienced surveyors at Good Move to receive a cash offer in just 24 hours.