Experts for Expats’ recent cost of living survey has revealed that 23% of people living abroad are considering selling their UK property as a result of the ongoing cost of living crisis.
The survey, which was conducted at the end of 2022, asked 200 people with UK connections how the ongoing cost of living crisis was affecting their immediate and future plans.
Of the people considering selling a property in the UK, 72% of them are also receiving an income from UK property and 67% are now looking to use the equity to support their retirement.
In addition to expats’ plans to sell one or more UK properties, the survey also revealed that nearly 90% of expats aren’t using currency exchange services to transfer their UK income abroad. This is despite 22% of people living abroad receiving £50k or more per year from UK sources, leaving them exposed to bank charges and continuously fluctuating exchange rates.
While leaving money in the UK can ensure expats aren’t exposed to fluctuating exchange rates in quite the same way, 9% of people receive their UK income in foreign bank accounts meaning they are exposed to both bank charges and the currency exchange rate of the day.
Almost half of all people surveyed say that they have been negatively impacted by the devaluation of GBP since the Brexit vote in 2016 and the significant devaluation of GBP in autumn 2022.
To put the impact of currency exchange rates into context, in 2022, the exchange rate between GBP and EUR fluctuated between 1.21 and 1.08. Therefore, selling a property for £250,000 could result in a difference of €32,500.
Max Huseyin, Senior Account Manager at Moneycorp, emphasised the importance of getting expert financial help saying “It’s imperative to seek advice about currency exchange whether your transferring regular smaller sums or much larger amounts, such as when buying or selling a property. Transferring funds from bank to bank leaves you exposed to bank charges, which can cost up to £450 per year, as well as exchange rate fluctuations costing potentially thousands of pounds.
“Currency exchange companies can not only offer expertise and guidance, but also offer a range of tools and services – for example, setting a forward contract which locks in the rate for two years or sourcing the competitive exchange rates from our panel of 16 liquidity providers – which can help you mitigate damaging economic situations out of your control.”
UK Capital Gains Tax requirements are often unknown to British expats
Selling a UK residential property while living abroad can also attract capital gains tax, even if you are a non-resident. The Experts for Expats survey also highlighted that 61% of people aren’t aware that capital gains tax may be due or that a non-resident capital gains tax return must be filed.
For Jamie Favell, Partner at Tax Advisory Partnership, this is a far too common scenario. He says: “Lots of expats sell their properties and become aware of their non-resident capital gains tax obligations too late, incurring late filing penalties and facing unexpected tax liabilities.”
“This situation seems to be more common for people who left the UK and moved abroad before 2015 when the new non-resident CGT rules were introduced, and they simply weren’t aware of the change and have not been made aware of the changes by their solicitor or estate agent.”
“Expats also need to be careful to ensure they are reporting the sale of their UK property correctly in their country of residence, to avoid further problems there too. If there is tax payable locally, then they may be able to claim a credit for any UK tax payable reducing the overall tax due.”
This is particularly relevant for people selling a UK property as the tax deduction will not only hit their equity, but any tax due has to be reported and paid to HMRC within 60 days of completion.
Expats should always seek specialist help when making major financial decisions
Robert Hallums, Founder of Experts for Expats, is concerned that expats are making decisions which could exacerbate the cost of living crisis even further.
He says: “The results of the survey are deeply concerning. It’s simply not enough to hope that selling a UK residential property is the same as when you live in the UK as when you live abroad.”
“There are so many potential factors to consider that you must seek advice from specialists to ensure the sale not only goes smoothly, but also maximise your income and eliminate unnecessary costs – especially if you are planning to use the funds to re-invest or support your retirement.”
