When deciding how to invest in UK assets as an overseas national, it is important to explore all possible UK investment options for foreigners. There are several different ways to make a healthy financial return on an investment in the UK, including purchasing UK real estate, buying stocks and shares in UK companies, or even setting up or investing in a UK business.
Below we examine these three key ways to invest for both foreign and non-UK resident investors, together with some of the pros and cons of each potential investment option. We also set out some key top tips for investors when making financial investments in the UK.
Can foreign nationals invest in the UK?
There are few restrictions on investment in the UK from abroad, where the UK provides a plethora of opportunities for both UK and non-UK residents alike. However, there are benefits and drawbacks to any potential investment scenario, regardless of nationality or residence status, where it is important to weigh these in the balance. Additionally, for those residing abroad, investing in the UK can also pose a number of practical issues that must be factored into the overall equation when considering the best way to invest any money.
The investment options below set out just some of the ways in which a foreign investor can invest in the UK with a view to receiving a healthy return, both in the short and long term, while examining some of the risks involved when it comes to investing in UK assets.
UK investment options for foreign investors
There are various different types of UK investment options for foreigners and non-UK residents. Below we look briefly at three of the most popular ways to invest in UK assets.
UK real estate
Purchasing UK property is possibly one of the most sound ways to invest money from abroad, where the value of property in the UK has steadily risen over the last few decades and the annual yield from rental income can be high. As such, especially for a cash buyer, an investor can expect to be able to rent out their property to provide them with a monthly income, as well as to capitalise on any profit from the sale of that property in the future. For those brave enough to take on a renovation project, there is also plenty of cash to be made in the short term by developing a property and selling it on for a much higher price.
However, even though there are no legal restrictions on buying property in the UK as a foreign investor, there are a number of possible hurdles to overcome, as well as various potential drawbacks to factor in. For example, for those looking for a buy-to-let mortgage, ie; where an investor does not have the funds to buy a property outright, the mortgage products available to non-UK residents are likely to be far more limited, with far more onerous terms and conditions, than for UK residents. As such, even with a good mortgage broker to identify potential lenders, it is likely that any UK-based lender will still impose high interest rates and require a sizeable deposit on any buy-to-let mortgage.
Even for those investors who are not looking to buy a property in the UK to rent out, but as a nest egg for the future and with the property to be used as a holiday home in the interim, depending on nationality and how often the property owner would like to visit the UK, there may be issues seeking entry clearance to the UK to make good use of that property.
For non-UK nationals who are required to apply for a visa in advance of travel, it may be possible to secure a long term visit visa to come the UK on multiple occasions during the validity of that visa. However, if border officials have any concerns that this visa is being used to live in the UK for extended periods, the visa-holder may be refused entry. This can also apply to non-visa nationals seeking entry clearance at a UK border. In either scenario, it is also important to bear in mind that unless the investor has a British passport, or otherwise has permission to live in the UK, they can only visit for up to 6 months at a time.
Non-UK investors also need to factor in the various other restrictions that can come with owning a property in the UK, not least as a landlord, including the many responsibilities on a landlord to keep a property in good repair and to meet various strict regulatory standards. Admittedly, many of these practical issues can be handled by a good UK-based lettings management company, although an investor would still need to include the cost of maintaining and managing the property when assessing any potential return.
In conclusion, buying UK real estate is not necessarily straightforward, with various different considerations to be taken into account, from the relevant visa requirements to renting out property as a foreign landlord. As such, when it comes to how to invest in UK property, expert advice should always be sought from a UK property specialist.
UK stocks & shares
The UK remains one of the most important financial hubs, with one of the world’s largest stock markets and, despite recent economic challenges in the UK, it is still perceived as a safe investment haven for foreign investors looking to trade on the stock market.
Buying stocks and shares essentially refers to the stakes that a shareholder owns in a company which can be bought or sold on the stock market, although the profit that can be made through trading in shares, or the capital that can be lost, can dramatically fluctuate. This means that even though there are plenty of lucrative opportunities to be had when investing in UK stocks and shares, it can sometimes be hard to predict a company’s performance or any external factors that could affect that performance. This is therefore a somewhat high risk approach to investment right across the world, including the UK.
An alternative lower-risk option available to foreign investors would be to invest in a diverse range of assets by way of investment funds. These are a type of collective investment, where the money from various investors is pooled together to purchase a portfolio of assets — such as shares, property, bonds and currencies — that are then taken care of by a professional fund manager. In this way, although the return on investment is typically far lower than trading on the stock market, so is the risk. This is because the risk is spread across a range of different options, known as diversification. However, an investor would need to factor in the costs of having an investment fund professionally managed.
In conclusion, trading in shares or buying into an investment fund will typically require expert advice and assistance from a UK financial investment specialist.
In the UK, there are all sorts and sizes of businesses and companies, where there are plenty of promising options to invest in, including innovative startups or small and medium-sized enterprises (SME’s) with the potential for significant growth. Equally, there is plenty of scope for an entrepreneurial investor to join thousands of other successful business-owners by financially backing their very own UK-based business venture.
However, investing in a privately-held company, as an angel investor for example or through crowdfunding, can be far tricker and restrictive than investing in a publicly-traded company by way of stocks and shares that can be easily sold. This can be a risky strategy for a foreign investor, where the company could take years to see a return. An angel investor is typically a high-net worth individual who funds start-ups with their own money in return for a minority stake, while crowdfunding is where a venture is funded by multiple investors who each contribute a relatively small amount, usually via an online platform.
Establishing a brand new business in the UK is equally fraught with risk, not to mention presenting a number of practical hurdles, especially if the foreign investor is looking to run that business themselves. If so, this will require the investor, and possibly their immediate family if their dependants are looking to accompany or join the them in the UK, to meet the various strict requirements for a suitable business visa under the UK’s Immigration Rules.
Starting and running a UK-based business also involves various other practical and legal considerations, from the type of business structure that is best suited to the nature of the business, to registering the business with the relevant authorities. This could include registering with Companies House if setting up a business as a private limited company or a limited liability partnership, as well as registering with HM Revenue and Customs (HMRC). A company would need to register with HMRC for the purposes of paying corporation tax, while a partner or sole trader would need to register for self-assessment to pay income tax.
Finally, for those investors who do not have a sufficient sum of money to successfully launch their new business, and therefore in need of additional funds, this will involve attracting other investors or UK-based financial providers to back their venture. While there are plenty of financial providers that would provide borrowing to an overseas entrepreneur, the terms and conditions of any arrangement may be onerous.
In conclusion, when it comes to how to invest in UK business ventures, expert advice should be sought from those experienced in investing in and possibly running a UK-based business, although the nature of that advice will depend on how much involvement the investor is looking to have. For some foreign investors, they may be looking to invest money as a silent partner in a business, while others may be looking to start and run their own company, each with their own benefits and drawbacks that will need to be carefully considered.
Tips for investing in the UK
The best top tip that can be given to any non-UK resident thinking about investing their money in the UK is to seek expert advice from a specialist. The value of obtaining early advice cannot be underestimated, where a specialist adviser can help the novice investor to explore the various UK investment options for foreigners, helping them to navigate the potential pitfalls, and weigh into the balance the possible benefits and drawbacks.
The best way to invest money in the UK will all depend on how much an investor has to spend, how much risk they are prepared to take and how quickly they would like a return on their investment. This is why it is essential for any investor to seek tailored advice based on their individual circumstances and expectations, so that they can make an informed decision on their approach to investment, and their overall risk and return strategy.
Having decided on the type of investment that an individual would like to make, it can also be equally worthwhile seeking specialist tax advice on the potential tax implications when looking at how to invest in UK assets. A non-UK resident investing in the UK will generally only be subject to UK tax on any UK source income and gains. Still, there can be significant UK-based tax liabilities, depending on the amount of any profit made, with implications for income tax, capital gains tax, corporation tax and even inheritance tax.
Equally, actually dealing with UK tax matters, and the administrative responsibilities when it comes to filing tax returns with HMRC — in conjunction with any tax liabilities and responsibilities in the investor’s home country — can be complex. Importantly, the overall tax position in relation to any UK investment can also be impacted by any taxes imposed in the investor’s home jurisdiction, and the terms of any applicable double tax treaty.
The astute investor will therefore do their homework before investing in UK assets, not only to assess the potential profit to be made on an investment, but the tax liabilities and responsibilities that attach to any income or gains, both home and abroad. Still, with the right advice and assistance when it comes to how to invest in UK assets, despite the potential risks and responsibilities involved, a UK investment can really pay dividends.
How to invest in the UK FAQs
Can a non-UK resident invest in the UK?
There are few restrictions on investment in the UK from abroad, where the UK provides plenty of opportunities for both UK and non-UK residents alike, although it is important to weigh into the balance all relevant risks when investing money.
What is the best way to invest in the UK?
The best way to invest money in the UK will depend on how much an investor has to spend, how much risk they are prepared to take and how quickly they would like a return on their investment.
How to buy investments in the UK?
There are several ways to buy investments in the UK, from directly buying into a private limited company as an angel investor to indirectly buying stocks and shares in a publicly-traded company by way of a professionally-managed investment fund.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.