Over a million Brits currently own a home overseas, with France and Spain being the most popular destinations. However the global economic slowdown has hit homeowners not only at home, but also abroad as the cost of maintaining a property has increased -over a fifth of owners (21%) are struggling to meet the increased costs, according to latest research from a currency firm.
Trim the cost of maintaining your property in Tenerife by following a few simple steps
85% of overseas property owners say the cost of maintaining their property has gone up in the last 12 months, so you should attempt to reduce the cost of being an overseas property owner.
Whilst mortgage rates may have gone down for many owners, the overall cost of owning a property overseas (including local taxes, utility bills, maintenance costs etc) has continued to grow and the rising costs of ownership have been magnified by sterling’s depreciation and the continued market nervousness over the hung parliament following the General Election Many homeowners are also seeing their rental income from a holiday home hit, as the number of potential tenants decreases with more people opting for ‘stay-cations’ in their home country.
Two years ago the average overseas home owner transferred £10,000 a year to meet maintenance costs (including overseas mortgage payments) and provide spending money when they visit their second home. However as the pound has taken a beating against all the world’s major currencies, they now have to convert significantly more in order to meet the costs associated with their international property such as maintenance costs, mortgage payments, utility bills and local taxes.
For example, in October 2008, £10,000 would have bought you €12,900. To receive the same amount of Euros today, a Brit has to transfer £11,896, almost £2,000 more. People making regular currency transfers should set up a Regular Payment Abroad plan with a currency broker such as Moneycorp that allows you to lock into an exchange rate for up to 12 months ahead so you know know exactly how much is being transferred every month.”
According to the research, almost 70% of holiday home owners are missing out on vital income by not renting out their overseas property. Almost half of those that do rent it out only do so to friends and family who traditionally pay less than other tenants.
Overseas home owners have to pay ongoing taxes on ownership, such as local taxes or even tax on rental income. This is usually payable in the country where the property is located, but if you are a UK resident, such income also needs to be recalculated into Sterling and is taxable in the UK, regardless of where it is paid, with any appropriate relief given in the UK for taxes paid abroad. Each country will tax the income according to its own rules, so sometimes more allowances are available abroad than in the UK or the tax rates abroad may be lower, but the higher tax liability will be due. However, there may be ways of reducing your tax bill, but whatever you do, you only pay tax when you make money. Spending money unnecessarily to save tax can often be a false economy It is important to make sure that you claim whatever allowances you are entitled to.
People who take advice before buying their property abroad often manage to make their purchase more cost-effective than those who buy without taking advice so you should at the very least check the advice of a reliable estate agent.
