Living in Cyprus and thinking of selling your UK property? Weigh up the pros and cons

For British expatriates living in Cyprus, weighing the decision to sell UK property involves considerations beyond mere investment, including future plans and capital allocation. Explore the key factors guiding this pivotal choice.

Many British expatriates like to keep hold of their UK property after moving abroad, either to have a safety net in case their move doesn’t work out, or just to keep it as an investment asset.  There comes a time, though, when they wonder if it is time to sell it because they have no plans to return to the UK, to simplify their affairs, or find new ways to invest the capital tied up in the property.

If you are undecided about whether to keep your UK property or not, here are some considerations that may help you reach a decision.

• Do you intend to live in Cyprus indefinitely? Or do you want the peace of mind of knowing you (or your spouse) have a home available should you decide to return to UK in the future?

• If it is a family home that you’d like to leave to your children, would they want to live in it or sell it to release the capital? If it is the latter, you could sell now, invest the capital for growth, and arrange for the investments to pass onto them tax-efficiently.

• While UK rental income may be attractive, it can be eroded by repair costs, non-payment by tenants or void periods. Putting the property back into rentable condition after a tenant can be quite costly.

• The UK personal income tax allowances of £12,570 at the basic 20% tax band and £50,270 at the higher 40% rate are frozen until at least April 2028.

• Income from investments is often tax-free in Cyprus.

• A while back, the UK government considered limiting the personal allowance for non-UK residents. The proposal was shelved at the time, but remains an option for increasing tax revenue in future, especially now the UK is not by EU rules.

• You can no longer deduct mortgage expenses from your rental income to reduce your UK tax bill. Buy-to-let tax relief has been replaced by a 20% tax credit, which is not as beneficial for higher rate taxpayers.

• The annual UK capital gains tax allowance has been slashed over the last two years, from £12,300 down to just £3,000 from April 2024.

• Being non-UK resident does not mean you escape UK capital gains on selling UK property, though you are only liable on the gain made from April 2015 for residential property and from April 2019 for commercial property.

• You will not need to pay any tax in Cyprus, regardless of how much gain you make, as capital gains tax in Cyprus is only charged on local property.

• If you are hoping to become a non-UK domicile to avoid UK inheritance tax on your worldwide estate, having property in the UK does not help your case.  And UK assets are always liable to UK inheritance tax, regardless of domicile, if your UK estate is above the thresholds (which are frozen till 2028). There is no inheritance tax in Cyprus.

• While property can be a solid investment, it locks your money away in a highly illiquid way. If you need to release funds, you may not be able to sell quickly or for the right price.  And if you just need, say, €20,000, you cannot sell just part of a property.   In contrast, equity and bond funds can usually be sold fairly quickly and just the amount you need, not the whole investment.

• While both shares and property have the potential to provide good returns over time, there are always risks with investments. And the key to reducing risk is diversification.  For most people, it is easier to obtain effective diversification though capital investments (which can include shares in property funds), than with bricks and mortar.  Financial assets also offer more flexibility to change strategy in line with market or personal developments.

Living in Cyprus and selling UK property| Get advice

At the end of the day, it’s a personal decision and you may have emotional ties to the property as well as financial ones.  But if you need help deciding, please don’t hesitate to contact our Cyprus advisers.  We are happy to help you weigh up the pros and cons of selling or keeping your UK property.

Likewise, if you have recently sold a property, we can recommend ways for you to invest the capital very tax-efficiently to suit your circumstances and objectives, for example, aiming to match the rental income you used to receive but with less tax to pay.

Contact us now for cross-border, specialist advice.

All advice received from Blevins Franks is personalised and provided in writing. This article, however, should not be construed as providing any personalised taxation or investment advice.