With the historic Brexit referendum taking place almost eight years ago, the realities of the UK’s departure from the European Union are now well and truly entrenched. Among the multitude of areas impacted by Brexit, one of the most significant is that of property ownership. In particular, the effects on EU citizens who buy, own or are considering the purchase of property in the UK can be both complex and far-reaching. This article aims to provide a clear and comprehensive guide to the main consequences of Brexit on UK property ownership for EU citizens, covering aspects from residency rights and visa requirements to tax implications and market trends.
Impact on buying property in the UK
Since the UK officially left the EU, buying property as an EU citizen has undergone several changes. Prior to Brexit, EU citizens could freely purchase and own property in the UK without any restrictions. However, the rules now vary depending on individual circumstances, including residency status and income.
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EU citizens who are already resident in the UK before the end of the transition period on 31st December 2020 can still buy and own property without any changes to their rights. To maintain these rights, they need to apply to the EU Settlement Scheme for settled or pre-settled status. The settled status is given to EU citizens who have lived in the UK for a continuous 5-year period, and pre-settled status applies for those who haven’t reached the 5-year mark but intend to stay.
For EU citizens who move to the UK after the transition period, the situation is different. They may need to show a residency visa to buy property. They also need to prove they can financially support themselves, as access to public funds is usually not available.
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Tax implications and changes
Brexit has also had a meaningful impact on tax implications for EU citizens with property in the UK. Prior to Brexit, EU citizens could enjoy the same tax benefits as UK nationals. However, several changes have occurred since January 2021 that significantly affect the tax status of EU citizens owning property in the UK.
One notable change is the Stamp Duty Land Tax (SDLT). EU citizens who are not residents in the UK may now have to pay an extra 2% on top of existing rates, as part of the foreign buyer’s tax introduced in April 2021. If you own a property in the UK but live abroad, you’re now considered a non-resident.
Another important tax change related to Brexit is the Capital Gains Tax (CGT). EU citizens who sell UK property may now have to pay CGT on the profits they make from the sale if it’s a second home or rental property.
Visa and work requirements
With Brexit, the free movement of people between the UK and EU countries has ended. Now EU citizens are subject to immigration control, which affects their ability to live, work or study in the UK.
For EU nationals who want to live in the UK, they need to apply for a visa. There are different types of visas, including the Skilled Worker visa, which requires a job offer from an approved employer. In addition, EU citizens who plan to work in the UK may need to show they have a job offer and meet a certain income threshold.
This may impact the ability of EU citizens to purchase property in the UK, as it could affect their income and thus their ability to secure a mortgage. Lenders may also consider the applicant’s immigration status when deciding whether to offer a mortgage.
Market trends and changes
Brexit has undeniably had an impact on the property market in the UK. Uncertainty surrounding Brexit negotiations and the future relationship between the UK and EU countries led to fluctuations in property prices and the overall property market.
However, despite the initial uncertainty and fluctuations, the UK property market has shown resilience. The demand for property, particularly in cities like London and Manchester, remains strong. The UK’s strong economy, stable political environment, and world-class education and healthcare services continue to make it an attractive destination for property investment.
On the other hand, Brexit has also led to a shift in where people choose to buy property. Some EU citizens are now looking to other countries for property investment, with Spain becoming an increasingly popular choice.
Impact on EU citizens living in Spain
With Spain being a popular choice for British nationals buying property abroad, the effects of Brexit have also been felt here. British buyers now face the same rules and procedures as other non-EU nationals when buying property in Spain.
This includes the need for a visa to stay in Spain for more than 90 days in a 180-day period. British nationals looking to work or become resident in Spain must now meet the same requirements as other non-EU nationals, which could involve providing proof of income or a work contract.
In terms of tax, British nationals may also now be subject to Spanish non-resident income tax, which could affect the profits made from renting out Spanish properties.
In conclusion, Brexit has brought about substantial changes for EU citizens owning or buying property in the UK, as well as British nationals owning property in EU countries like Spain. Understanding these changes is crucial for anyone considering a property investment in these countries.
Impact on Rental Income and Social Security Benefits
Brexit has also led to changes in the way rental income and social security benefits are treated for EU citizens owning property in the UK. Prior to the UK’s departure from the European Union, EU citizens could rent out their UK property and the income generated was subject to UK tax laws. However, post Brexit, EU citizens who earn rental income from a UK property will have to consider their tax status in both the UK and their resident EU member state. If not managed properly, this could potentially lead to double taxation.
Furthermore, social security benefits that were previously coordinated across the EU, such as healthcare, pensions and unemployment benefits, are no longer automatically guaranteed for EU citizens in the UK. The Withdrawal Agreement does ensure that those EU citizens who are already living in the UK by the end of the transition period, and who have obtained settled or pre-settled status, will continue to have their social security protected. This includes the right to healthcare, pensions and other benefits, as long as they remain resident in the UK.
For EU citizens moving to the UK post Brexit, their access to social security benefits will depend on their immigration status, and whether they have a visa that allows them to work in the UK. This has added an additional layer of complexity for EU citizens seeking to buy property in the UK and intending to live, work, or generate rental income there.
Changes to Inheritance Tax
Inheritance tax is another area that has seen changes as a result of Brexit. Previously, EU citizens could inherit property in the UK without having to pay any inheritance tax, as long as the total value of the estate was below a certain threshold.
However, post Brexit, the situation has changed. Now, any property owned by an EU citizen in the UK will be included in their worldwide estate for inheritance tax purposes. This means that if the total value of their worldwide estate exceeds the UK threshold, UK inheritance tax may be due.
The changes to inheritance tax could significantly impact EU citizens who own property in the UK, especially if the value of their worldwide estate is close to or exceeds the threshold. This is a complex area of tax law, and it is recommended that EU citizens who own property in the UK seek professional advice to understand the potential impact on their estate.
Conclusion
The consequences of Brexit on UK property ownership for EU citizens are manifold. From changes in the ability to buy property, to alterations on tax implications, and shifts in the property market dynamics, its impact is evident. Moreover, EU citizens are now required to navigate a new landscape of visa and work requirements.
Brexit has also had a reciprocal effect on British citizens owning property in EU countries like Spain. The changes to regulations on rental income, social security benefits and inheritance tax are as significant for them as they are for EU citizens in the UK.
Amid all these changes, it is crucial for investors to stay informed and updated. This includes understanding the terms of the Withdrawal Agreement, keeping track of new visa requirements, and being aware of the tax implications in their resident and non-resident countries. As the dust settles on the post Brexit landscape, a watchful eye on the evolving regulations will go a long way in helping investors make informed decisions about property ownership.
