The UK has historically been a fairly safe and easy place for Israelis wanting to diversify their investment portfolio and purchase property overseas.
London is especially attractive because it's a five-hour flight from Tel Aviv and the time difference is only two hours.
You may want to have rent-paying tenants occupying the property to ensure a regular source of income. Here are some tips.
Potential additional costs
One of the latest laws impacting residential apartments and multifamily buildings is the new Building Safety Act 2022 (BSA). The BSA came into force following the Grenfell Tower fire in 2017.
Devastatingly, the fire gutted the 24-storey apartment building known as Grenfell Tower, with the fire spreading through the cladding on the building's walls.
The good news is that cladding is now prohibited. If you are thinking of buying an apartment in a newly built block, this is not a problem. However, if you are buying an already constructed apartment, there has been a move since 2017 to remove such cladding, and various measures have made it clear who is responsible for removing the cladding of these blocks. You need to be careful about what is specified. To make the apartment safer.
This mainly depends on the height of the building and should be investigated by your solicitor to ensure that you, as the new owner, are not responsible for paying for any remedial works.
The new law makes significant reforms, giving residents and homeowners more rights, powers and protections, and clarifying how residential buildings are constructed, maintained and made safe.
Apartment owners in the UK, like owners in Israel, are required to contribute to regular homeowners' committee (va'ad habayit) payments. In the UK, this is called a service charge. In older buildings, you may need to pay additional ground rent annually, but it usually won't exceed a few hundred pounds.
If you decide to rent out your apartment and become a landlord, there are various regulations in place that a good management company should take care of for you. This includes ensuring that gas and electrical equipment within the apartment is safely installed and maintained. There is also a duty to ensure that the tenant's deposit is protected by a government-approved scheme and that the tenant has the right to rent.
UK tax considerations
Purchase tax must be paid to HMRC within 14 days of completing your purchase. This tax is called Stamp Duty Land Tax (SDLT) and the current tax rates for private residential property are roughly as follows: Purchase prices up to £250,000 – tax free. Part from £250,001 to £925,000 – 5%. 10% on the portion between £925,001 and £1.5m. And anything above this is 12%.
There are various reliefs available, but non-UK residents will have to pay an additional surcharge of 2% of the total price, and a further 3% of the total price if they own another property elsewhere in the world. must be paid.
Rental income is subject to income tax, but some expenses can be deducted from rental income, and everyone has an annual personal allowance.
HMRC has a non-resident landlord scheme for landlords residing outside the UK, which allows them to receive rental income tax-free from their tenants. Income tax is paid directly to HMRC and you must complete a self-assessment tax each year. To take advantage of this scheme, you will need to apply to HMRC.
Capital gains tax (CGT) is payable when a capital gain is realized on the sale of a property. At the moment he has an allowance of £6,000 per person, but the amount changes every year. His CGT rates for residential properties this year are between 18% and 28%.
Inheritance tax is another tax to consider and is currently only levied on assets over £325,000. You may be able to minimize the burden of this and other taxes by consulting with a tax accountant to plan your real estate purchase.
Israeli-resident investors should also check the Israeli tax implications, including reporting requirements and mechanisms to avoid double taxation.
As always, please consult experienced local legal and tax advisors at an early stage regarding your specific case. abby.korn@asserson.co.uk
The author is head of the residential real estate department at Atherson Law Firm in Tel Aviv. She is a lawyer in England and Wales.
