Under new changes to capital gains tax announced by the Chancellor, foreign property owners will now pay tax on any gains in value on UK properties they own. Under the current system, only second home owners who are UK residents pay the tax, which is typically levied at 28% on any rise in vale when they sell a property.
George Osborne said that the current system was “not right”.
The move had been expected when Deputy Prime Minister, Nick Clegg said last month, that the government was considering the change. This new tax change will come into effect from April 2015.
Wealthy property buyers from countries like China and Russia have been buying properties in London as a base for their visits to the UK and others from the Euro Zone have bought as a hedge against any break up of the single currency area. It is feared that foreign buyers of second homes are contributing to a housing bubble in London, where property prices are rising far faster that the other areas in the country with values rising by more that 10% in a year.
Mr Osborne said ” Britain is an open country that welcomes investment from all over the world, including investment in our residential property. But it is not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence, while those who don’t live here do not.”
It has been estimated that as much as 70% of newly built properties in central London are bought by foreign investors.