Set your sights on a bargain in the US
8BEN form enabling UK residents to benefit by paying a reduced rate of dividend withholding tax on dividends – down from 30 per cent to 15 per cent – from their US shares.’
Alisdair Macdonald has been building his exposure to the US market through his self-invested personal pension held with fund platform Tilney Bestinvest. He reckons about 10 per cent of his overall portfolio has a US flavour.
He believes that the world’s biggest stock market – even if it has barely moved in the last 12 months – cannot be ignored.
Alisdair, who is 60 and an actuary from Cheltenham in Gloucestershire, says: ‘It’s an innovative economy. I have a tax-friendly Isa that is very UK focused so for my pension I’ve chosen a more global approach.’
He invests using Invesco’s PowerShares, low-cost exchange traded funds. American exposure is through a fund that tracks the performance of 1,000 large American companies.
LIVING
THE US is always popular with second home buyers – although it has fallen behind key European destina- tions because of the strength of sterling against the euro.
According to website Overseas-Guides-Company, the strengthening of the dollar since early 2014 when it was at $1.70 to the pound compared to around $1.50 today means a price increase of around £13,000 on a $200,000 property.
Bargains may also be harder to come by after a steady rebound in house prices from their post-financial crash low point in 2012. But prices are still 12 per cent below their peak in 2006, leaving some room for potential growth.
Independent mortgage broker Simon Conn says Florida, California, Colorado, Texas and New York are the most favoured states among British buyers. The US mortgage market does not impose early redemption charges on fixed rate deals.
Simon says: ‘The typical five-year fixed rate is between 3.9 and 4.9 per cent, depending on the size of deposit although rates can be higher for condominiums or investment properties.’
Buyers of second homes, holiday homes or retirement homes must have a deposit of at least 30 per cent – but if they are buying to let out this rises to 35 or 40 per cent. This may be reduced for those with a permanent job lined up.
Christine Green, partner of London-based legal firm Veale Wasbrough Vizards, warns: ‘We advise clients with a US property to have a will written in the state where the home is located that deals specifically with it. This saves costs and delay following death. If it is not limited to the US property, there is a danger that a UK will could be revoked.’
Owners who are UK domiciled will pay inheritance tax on their worldwide estate. She adds: ‘The US has estate duty but there is a treaty with the UK so you will not pay twice.’