Hidden Dangers When Buying Property in The UK as a US citizen

A British woman and an American fiancé are planning to buy real estate in London. When they get married, two people plan to get dual citizenship. Financial Times received the following consultation: “Please, may you advise residency/citizenship implications and us on the financial if we buy and sell property in the UK (or the US)? Will home ownership impact either of our applications for citizenship to each other’s nationality?”

Philip Barth, head of immigration for Europe and Asia at law firm Withers, says that the most important thing is for both to decide where they want to live, and not rush to getting green cards unless they plan to live in the US first. So it is important that they do this in the right order so they can avoid being caught out by unwelcome tax obligations.

In the UK, private residence relief is available when you sell your home which, assuming you meet the requirements, means there will be no UK capital gains tax to pay.

However, US taxpayers are subject to US capital gains tax on the gain from the sale of their principal residence over $250,000 (or over $500,000 if you are filing jointly).

If you own the property jointly, your fiancée will need to report 50% of the gain. With UK house prices rising so fast, $250,000 as a contribution to a property from your finances may not buy you very much.

Although it may be convenient to say that it is dual nationality, it is not so in the case of American nationality. Rather, for overseas, it is generally avoided to be given American nationality.

If you have American citizenship, you will be taxed on income by the US government even if you have not lived in the United States. The website of IRS (National Tax Agency of the United States of America) says the following:

“Where you have citizenship in the United States, regardless of whether you are in the United States or abroad, the rules for filing the final tax return and fitting the prescribed tax are unchanged. Regardless of where you live, all incomes are eligible for US income tax, regardless of the income earned in any country.”

Also, the United States will not abandon a person wishing to give up his / her US citizen alone. There are exceptions, but Americans who leave their US citizenship need to pay a fee of withdrawal $2,350 (approximately ￥250,000).

This time it was a case of American citizenship, but each other's nationality are different, and when you buy real estate with two people, it is necessary to investigate the tax system as well.

The Financial Times Ltd added “the authors and The Financial Times Ltd are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.”

Writer:

Miyuki Kashiwado

Source: Financial Times