Non_UK Domicile Tax Affects Offshore Mortgage

Non-UK Domicile Tax Affects Offshore Mortgage

The Budget confirmed legislation on tax reforms for non-UK domiciles, which will impact on the tax-efficiency of overseas mortgages on UK property for non-UK domiciles living in the UK.  

Many believe this could have a significant impact on the London housing market.  

A mortgage, typically an interest-only loan, is taken out with a foreign bank and then serviced by offshore income, which escapes tax because the money is never brought into the UK.  The capital has to be paid by UK-taxed funds but this can be done by using the proceeds from selling the property.

Our view

The budget confirmed many non-UK domiciles will now either face a £30,000 fixed tax charge or a full UK charge to income tax on Worldwide income.  

This may mean that non-UK domiciles that have taken overseas mortgages on properties may not have been able to afford if it is paid out of taxed income.  This could result in many individuals having to sell up and downsize.  

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