It is a common opinion that London is the market for residential real estate investment among the most interesting compared to other cities globally. This is due to a number of competing factors, one of which is moderate taxation that prefers it, for example, to another highly sought-after capital like New York.
The most common forms of investment are:
- Purchase to obtain a rental income, known as a buy-to-let;
- Purchase for resale, therefore the purchase in view of the appreciation of the property over time, even with renovations;
- Purchase of building land. This is a niche that is generally attacked by builders.
The first is a very common form of investment that is also used by foreigners. Italians see London as a safe haven for the positioning of their capital. Property prices are not free from market fluctuations, but they maintain an excellent level. Indeed, thanks to the attractiveness of the British capital for study and work reasons, the properties appreciate constantly over time.
The restrictions due to the pandemic have even contributed to a significant increase in demand, especially in the context of rents rather than in sales.
Income from a leased property is tax-free up to £ 12,500. It is also possible to reduce the expenses related to the property, agency fees and commissions, condominium expenses, etc.
Real estate in London
The location is always decisive in the choice of investment. It would be ideal to be able to strike a good deal in the most prestigious residential districts such as Hampstead Heath, Notting Hill, Mayfair, Belgravia, South Kensington, and Richmond, where the investment is practically guaranteed.
Costs and expenses
During the real estate purchase phase, the costs, which are up to 5% of the purchase price, must obviously be assessed. Usually 3% for the real estate agency, and 1% respectively for any appraisals and legal fees.
The registration tax, the stamp duty, is calculated on the basis of the brackets and is included in a range from 2% up to 12% for luxury homes, with a starting exemption of up to 125,000 pounds.
The costs of managing a property in London are generally:
- the Council Tax, a municipal tax payable in proportion to the square footage, average costs £ 1,000 / year. If the property is rented, this tax is charged to the tenant;
- Ground Rent, a rental cost due to the freehold, or the owner of the land on which the property stands, has an average cost of £ 300 / year;
- the Service Charge is the payment of common services such as the condominium, heating, etc., this cost is therefore variable.
Taxes due for purchase in London by a buyer resident in Italy
The tax payable by a person residing in the Italian territory is called IVIE, or the tax on the value of properties located abroad.
It is calculated based on the cadastral value of the property by multiplying the cadastral income with a rate of 0.76%. This is advantageous as the income is significantly lower than the value of the property.
If there is a capital gain, which is generated for example in the purchase and subsequent resale, the Capital Gains Tax must also be paid even if the person does not reside in the British territory. The rate ranges from 18% to 28% on the capital gain generated and any other income in the UK. However, there are corrections in the case of the main residence, or the case of the buy-to-let, without forgetting that a free tax area of about 11,000 pounds is then provided.