Britain To Tax Foreign Residential Property Investors

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Britain plans to impose a capital gains tax on home sales made by non-resident investors starting in April 2015, Chancellor of the Exchequer George Osborne said in Parliament today.

British residents are liable for the tax on the sales of second homes, payable at a rate ranging from 18 percent to 28 percent, while foreign investors are exempt. 

This is unfair, the Chancellor said. 

"Britain is an open country that welcomes investment from all over the world, including investment in our residential property," he said. "But it's not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence - while those who don't live here do not."

The government had been reviewing proposals for tax increases to help reign in the upward price trend in London. 

Foreign investors have been highly responsible for the major increases in the London property market, helping it outpace the rest of the U.K., analysts say. 

While some believe the new tax will help stabilize the market, others don't expect a major change. 

"Tax is not the primary driver for the majority of international buyers of residential property in London," Liam Bailey of global real estate advisor Knight Frank, told Forbes. 

"We anticipate that the removal of the CGT exemption for non-resident purchasers will have only a marginal impact on demand and pricing. It is important to note that the change to CGT rules brings the UK in line with other key investor markets, such as New York and Paris, where equivalent taxes can approach 35 percent - 50 percent, depending on the owner's residency status."