finally buying a house in UK! now the tax questions.....

Hello all , after 3 years back in states , we are now finally moving back to uk for good hopefully , we are buying a house in St Albans , and wondering if:

1) we will be taxed on the funds coming over here from our money market account ( which will briefly hold the proceeds of our US house sale, this is for wiring purposes )

2) Are there any tax benefits, eg. not paying stamp duty, we would receive as non-citizens?

Anyone who has gone thru this before?
Thanks !
Caroline and Brendan

i bought a house in the UK 2 yrs ago.  the deposit money was in a money market acct in the states.  it was invested in mutual funds, which i then had to liquidate when i need teh $-£.  i consulted an accountant before transferring the money to the UK.

in the end, i was able to minimize the UK taxes i paid through capital gains analysis.  however, i did have to pay tax because i was remitting the funds to the UK. 

i had to pay stamp duty. 

2) Are there any tax benefits, eg. not paying stamp duty, we would receive as non-citizens?

Everyone who purchases a propriety in the UK has to pay stamp duty (for properties over £125k). Since you are buying in St. Albans I would imagine the price is way over that threshold.

Best wishes on your move back.

Thanks Jules & Meggles for your quick replies... we will be starting the whole process within the next week or so and it's a bit stressful ...

We figured the stamp duty was inevitable, but just wanted to check ..

Meggles, do you mean you paid taxes on the capital gains when you sold the house, or did they take a percentage from your transferred deposit money straight away -- or is this done on your tax return?  Do remember what percentage the tax was?  Is it worth going to see an accountant/tax lawyer in the UK before we do this?  It seems unfair to tax money you already paid taxes on, but if this is the case I hope the percentage is small!

Thanks so much,
Caroline & Brendan

Actually, not eveyone has to pay stamp duty. We are buying our first place and it is stamp duty exempt.  There are areas in Britain that are called regeneration areas where they are building loads of new properties to try and increase housing supply as well as build particular areas back up.  Most of these properties, if under £150,000 are stamp duty exempt.  But if you are in the London area, you will almost always have to pay it.

Hi there,

See what Guya and Lizzit have to say as they certainly know alot more as their jobs involve tax.

The rest of us including me, will give advice based on what's known or have gone through! - I used to need to know a intermediate level of tax regulations etc via my previous corporate job at Intuit and TurboTax & Taxcalc - so from what you say it sounds as though you've made some money in capital gains over there. You'll have paid whatever taxes the US / your state place on capital gains there.

The money left over is 'your' money - but now that you want to 'bring' that money to the UK, you'll need to find out if indeed it's subject to UK tax or not - I'm a bit vague but I'm leaning towards it is taxable - but seeing that theres a double tax treaty between the US and UK, it'll turn out to be that you won't be taxed so long as you prove where the money came from and any associated taxes due have been paid on it.

I girl i know has just bought a flat in St Albans, which is just a few miles from here (our warehouse unit) and St Albans is considered a very nice place indeed, some of the surrounding places are very leafy and I was gobsmacked the other day whilst having to do a ratrun to avoid traffic at some of the houses I saw! they must all be well over a £million ! - the girl i know moved in about a month ago and I think she paid £210 grand for it (its in a older purpose built block / buildign conversion type place with period features apparently) so like others have said, you'll probably be liable for stamp duty - I haven't heard of stamp duty exemptions on the basis of being non citizens though - you may need to check that out fully. Your ongoing Council Tax you will not be exempt from unless you meet certain criteria and that's usually for people on state benefits - which I somehow doubt you'll be if doing an international relocation!

I should get my now semi dusty tax notes and booksk I used to have and read up and get updated versions of methinks!

I would recommend getting independant advice from a suitably experienced US and UK tax accountant who'll be able to give you proper and suitable to your situation tax advice better !

Cheers! DtM! West London & Slough UK!

alright- i'm not an accountant and guya & lizzie will probably correct bits.  but in laymans terms:

the money i was transferring were US income that had been invested in mutual funds in the US.  when i sold these, i had to pay long term capital gains taxes in the US. 

when i moved them to the UK, i had to pay UK capital gains taxes as well.  now, the capital gains taxes are different here.  first off, there's no long & short term capital gains for stocks/shares/mutual funds.  secondly, everyone gets an allowance for capital gains.  ie- i didn't have to pay tax on the first £85000ish of capital gains income(that was the allowance in 2005).  it also gets more complicated by the exchange rate on the day you bought & the day you sold the funds.  by manipulating this (with the help of my accountant), i was able to minimize my UK capital gains liability.  you also get to deduct capital gains taxes already paid in the US (hence avoiding double taxation that you point out)

so, even though I transferred a large sum of USdollars to the UK, the actual profit was low, and the actual tax liability.  in my case:

Total Profit:                                 £10,440.89
Amt above Capital Gains Allowance: £1,940.89
US Taxes Paid                $2,271.89
US Taxed Paid (in £)                     £1,247.04
UK Taxes Liability                £693.85
UK Taxes Paid                              £152.65

This £693 was taxed at my standard rate- which was 22%

a few months after i transferred the money from the US to the UK, i recieved a letter from the inland revenue informing me that I would need to fill out a tax return for that year.  i forwarded my US tax return, P60, P11D to my accountant, and viola- paid my taxes. 

I thought stamp duty was only for properties over £250k?  I swear that's what the SO's told me & he's an estate agent...

I thought stamp duty was only for properties over £250k?  I swear that's what the SO's told me & he's an estate agent...

http://www.hmrc.gov.uk/so/rates/index.htm

Just out of curiosity....

What if you cash out of investments you've held for 3 years and put them into a new investment for just a short period, say two months.  THEN you cash out and ship funds to the UK.

In this case would you just pay for gains on the second investment?  By doing this can you avoid paying taxes on the bigger 3 year gains?

If there are any Inland Revenue agents out there, this truly is a hypothetical as I send money the other way - UK to US!

not sure about UK tax, but you would be liable for short-term capital gains in the US rather than long-term.  a substational difference.

http://www.hmrc.gov.uk/so/rates/index.htm

I stand corrected!  Thanks

Thanks everyone for your replies......

It's such a help to be able to contact people who have been through this.

We're freaked out by this whole house-buying experience, but hopefully all will go well and the weeks will fly by..

Caroline & Brendan

Thanks everyone for your replies......

It's such a help to be able to contact people who have been through this.

We're freaked out by this whole house-buying experience, but hopefully all will go well and the weeks will fly by..

Caroline & Brendan

Right there with you! I have never bought a house in the states and DH has never bought one here so this is a learning experience for the both of us.  We just exchanged  contracts last week.  But the good thing is, even if we have what may seem to be silly questions, our finacial advisor and solicitor have been pretty good at getting things answered.

Meggles, are capital gains on investments in the UK always based on your highest tax rate?  So, if you're in the 40% bracket does that mean that an investment (in the UK) is entirely taxed at 40% (obviously above the threshold)?

Thanks.