Overseas property: currency and finance.

An illustration

Take a property priced at €300,000. The exchange rates below are round, hypothetical numbers chosen to show the arithmetic. They are not actual or forecast rates.

If the pound moves from €1.20 to €1.10 between reservation and completion, the same euro price costs £22,727 more, about 9% of the original sterling cost. At the other end, bought for £250,000 at €1.20 and sold for the same €300,000 when the pound buys €1.30, the sale returns £230,769 before costs and tax, with no change in the euro price. Either way, currency is a second source of gain or loss that no buyer controls.

Pegged currencies

The UAE Government portal states that the dirham has been pegged to the US dollar since February 2002, at 1 US dollar to 3.6725 dirhams. For a UK buyer, a peg changes the exposure rather than removing it: a dirham price behaves like a dollar price, so its cost in pounds moves with sterling against the dollar. A peg is a policy, not a guarantee. Paying for UK property from abroad instead? See currency and international payments.

Check the firm, and how your money is held

The FCA's guidance is to check the Financial Services Register to confirm that a payment provider is authorised and has permission for the service it offers. E-money institutions and authorised payment institutions must keep customer money in a separate safeguarding account with a bank, or protect it with an insurance policy or similar guarantee; small payment institutions are not covered by that requirement. If a non-bank provider fails, the FCA says you should get most of your money back, but it may take time and may not be the full amount, and the Financial Services Compensation Scheme will not protect it.

Confirm the payee

The National Crime Agency warns that criminals target home buyers because of the scale of the transactions. Its advice: be highly suspicious of any change in account details, double-check a payment request by another method using contact details from a separate source, and if in doubt, do not transfer the money. In the UK, Confirmation of Payee checks the name on the receiving account; the Payment Systems Regulator reported in October 2024 that it covers over 99% of Faster Payments and CHAPS transactions. Those are UK systems, so for a transfer abroad, confirm the details directly with the lawyer or developer using a number you already hold. If you think you have paid a fraudster, the FCA's guidance is to contact Report Fraud on 0300 123 2040, and tell your bank at once.

Evidence your source of funds

Banks, payment firms, estate agents and independent legal professionals are among the businesses the UK's Money Laundering Regulations 2017 apply to, and firms abroad follow their own country's checks. Expect to show where the money comes from at each end, and keep a record of every transfer, with dates, amounts and rates, for UK tax later.

HMRC's Capital Gains Manual converts the cost of an asset bought with foreign currency at the exchange rate in force at the date of acquisition, and the proceeds at the rate on the date of disposal. It does not accept a gain worked out in the foreign currency and then converted. Using the illustration above, a property bought for €300,000 at €1.20 (£250,000) and sold for €300,000 at €1.10 (£272,727) shows a sterling gain of £22,727 before costs and reliefs, with no change in the euro price. The reverse can produce a sterling loss.

From 6 April 2012, HMRC's manual says foreign currency bank accounts held by individuals, trustees and personal representatives do not give rise to chargeable gains or allowable losses. For a borrower, a foreign currency loan is a liability, not an asset: an exchange loss on the loan is not allowable, although a gain or loss may arise on the currency used to repay it. This is an area for specialist advice.

Rent received in another currency is still reported in pounds, usually on the foreign pages (SA106) of a Self Assessment return, which are also where foreign tax credit relief is claimed. The full picture is in our guide to UK tax on overseas property.

Start from the Invest abroad hub. Living outside the UK and buying here instead? See overseas investors. For UK developments listed now, see current opportunities, or speak to us.