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How Brexit might affect finances for UK expats in Sweden

Any Britons living in Sweden will probably want to read this.

Published: 23 March 2017 11:00 CET
How Brexit might affect finances for UK expats in Sweden
Photo: Pixabay/Blacktower Financial

 Brexit has sent the number of UK citizens applying for Swedish citizenship soaring, prompting loads of questions from anyone with family or financial ties between the UK and Sweden.

While the dust has yet to settle, there are a number of issues to consider for anyone intending to stay in Sweden post “Brexit” as a UK expatriate.

Taxes

“For starters, applying for Swedish citizenship does not automatically change your tax “domicile”,” says Shaun Armstrong of Blacktower Financial Management (International) Ltd, himself an expat living in Sweden.

“You may still be liable to pay UK Inheritance Tax on your worldwide assets – possibly including the family home you own with your Swedish partner.”

Moreover, changing tax domicile is a difficult and lengthy process that needs to be completed with HM Revenues and Customs.

Pensions

Pension Planning post “Brexit” offers some unique opportunities when it comes to transferring one’s pension, such as using Qualified Recognised Overseas Pension Scheme (QROPS) to transfer your UK pension out of the UK.

“By using a QROPS you can get access to your pension at 55, convert final salary income schemes to lump sums, change currency from GBP to SEK and better secure the rights of your family upon your death,” Armstrong explains.

Of course, the UK has yet to actually leave the EU so the longer term exchange rate of the GBP with SEK is uncertain. Thus, converting GBP assets to SEK may or may not be a good idea.

To manage the currency risk, Armstrong suggests using forward contracts as a hedge against future fluctuations.

Investments

Investment portfolios and other assets in GBP will need to be carefully managed to maintain one’s wealth in Sweden in the longer term.

“Redundancy packages for UK expatriates in Sweden means serious decisions need to be made,” warns Armstrong. “The current strength of the SEK against the GBP can offer a distinct advantage for those considering a return to the UK.”

One option to help plan for and manage these issues could be the Old Mutual International Swedish Executive Portfolio.

As a Swedish “Kapitalförsäkring” product written in both English and Swedish, this Swedish Executive Portfolio is available in a range of currencies including GBP and SEK, and is tax efficient in Sweden.

It also has several unique features to help manage inheritance tax issues, and can be used for QROPS transfers and managing investment portfolios.

“Financial planning for expatriates is complicated and requires a broad knowledge base and specialised products,” says Armstrong.

For anyone interested in learning more, Blacktower Financial Management (International) Ltd is holding a series of free, no obligation seminars on these subjects above and more through its Stockholm office.

“These seminars can help you make the very serious decisions you face regarding your future in Sweden,” says Armstrong.

For more information about these seminars please contact:

Shaun Armstrong

Regional Manager Sweden
Email: [email protected]
Tel: 073 545 9818
Address: Stureplan 4C, Level 4 Stockholm
Website: www.blacktowerfm.com

*The above information was correct at the time of preparation and does not constitute investment advice. You should seek advice from a professional adviser before embarking on any financial planning activity.

Blacktower Financial Management (International) Limited is licensed by the Gibraltar Financial Services Commission. Licence Number 00805B.

This article was produced by The Local Client Studio and sponsored by Blacktower Financial.

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LIVING IN SWEDEN

What you need to know about owning a second home in Sweden

In most countries owning a second home is a luxury reserved for the wealthy, but in Sweden it's very common to have a summer home or 'fritidshus'. Here's what you need to know.

Published: 8 February 2024 15:25 CET
What you need to know about owning a second home in Sweden

What is a fritidshus? 

In Sweden, second homes are generally either classified as a fritidshus, literally a “free time house”, or a permanenthus or permanentboende.

A fritidshus is defined as “a house which is not set up for all-year-around living”. Rather confusingly, this does not mean that you can’t live all-year-round in a fritidshus, or, indeed, that you can’t use a permanenthus as your summer house. 

The difference comes down to how the two types of property are treated in Sweden’s building code, with fritidshus allowed, among other things, to have lower ceilings, smaller bathrooms, more basic kitchens, worse accessibility for disabled people, a lower standard of insulation. 

If you decide to live permanently in a fritidshus, you do not need to get approval to do so, but the building committee at your local council can, if they learn of what you are doing, demand that the building be changed to meet the requirements of a permanenthus (although this rarely happens).

There is also a subgroup of fritidshus, kolonilott, which are houses with a small amount of land which should be used for growing food (although lots of people just use them as attractive gardens). This is different from an odlingslott, which is just an allotment, essentially a kolonilott without the house.

These are usually in designated kolonilott areas close to or in cities, and are not intended for year-round living. In most kolonilott areas, water supply and drainage is cut off outside of the growing season, and you’re not allowed to register them as your permanent address, for example.

Relaxing outside a summer house. Photo: Doris Beling/Imagebank Sweden

How much does a second home cost? 

The average price of a fritidshus fell by about 6 percent in 2023, following a 1 percent fall in 2022, and now lies at about 2.2 million kronor.

But a search on the Hemnet website for fritidshus under 1 million kronor shows that many sell for a lot less, particularly outside the most popular areas. 

As a rule of thumb, anything within an hour’s drive of Stockholm, Gothenburg or Malmö is likely to be more expensive, as is anywhere on the coast (particularly on Gotland), next to a lake, or near one of Sweden’s more popular skiing areas. 

A report from Länsförsäkringar Fastighetsförmedling, out in mid-2023, found that summer houses were cheapest in Kronoberg country (the southern bit of Småland), followed by Örebro, Värmland, Norrbotten and Västernorrland, and most expensive in Gotland, Stockholm County and Halland. 

What’s the point of having one? 

Despite its vast expanses of unspoiled nature, Sweden is very urbanised, with nearly 90 percent of people living in built-up areas and 63 percent in the biggest few cities. It’s much more common to live in an apartment in a city than in the sort of suburban sprawl of houses with their own gardens so common in countries like the UK and US.

This means that most urban Swedes leave any gardening to their summer houses or allotments.

Given the cold, dark winters, that probably makes sense. 

Fritidshus and other second homes are also at the centre of the long Swedish summer break, when people often take three, or even four, weeks off back-to-back. If you don’t have your own fritidshus, you can spend much of the summer visiting people who do. 

What’s the downside? 

Aside from the cost, it’s a lot of work. Owning a fritidshus means weekends spent at out-of-town building supply shops, and brings a whole new list of chores like cleaning the gutters, mowing, trimming hedges, raking leaves and chopping wood.

If you like foreign travel, and have a lot of other passions and hobbies, you may find owning a summer house squeezes them out. 

A summer house in the Stockholm archipelago. Photo: Sara de Basly/Imagebank Sweden

How common is it to have a fritidshus? 

There are about 607,000 fritidshus in Sweden, and according to Statistics Sweden, about one in three children (35 percent) have access to one.

It most common to have access to a fritidshus in the north of Sweden, with more than half of children having access to one in 51 municipalities north of Dalarna, and it is least common in Skåne, where in some municipalities only 10 percent of children have access to a fritidshus. 

Is it best to have a second home in a fritidsområde or on its own? 

Many municipalities in Sweden have set aside areas, often near a lake or by the sea, specifically for the building of fritidshus, selling off plots, or tomter, on which people can either build a holiday cottage themselves or get a builder to do it.

According to Statitsics Sweden, about a quarter of fritidshus are in such an area, with Stockholm County boasting the most fritidsområde, or holiday home areas, followed by Västra Götaland (near Gothenburg) and Skåne (near Malmö and Helsingborg). 

If you are building your own summer house, the advantage of doing so in a fritidsområde is that electricity, water and sewage has normally already been run along the edge of the plot, making these services cheap and easy to connect. 

If you want to get a summer house near the coast or a lake, it is also cheaper if you buy one in a fritidsområde. 

On the downside, they can feel a little like living in a housing estate, you have to be careful not to make too much noise, and can end up getting complaints from the local neighbourhood committee if you don’t maintain your property in the way they expect. 

As many fritidsområde were set up the 1960s and 1970s, with a lot of the houses then built by enthusiastic amateurs, they can also be in desrepair and have structural problems. 

The plots that have yet to be built on, meanwhile, are often the worst, for instance with ground that is damp or prone to flooding. 

Renting out your second home

One of the advantages of your second home being classed as a fritidshus is that – so long as you’re only renting it out short-term — you are not covered by Sweden’s strict rental law or hyreslagen.

This means whatever rent you agree with the tenant is valid, there is no requirement to ask for a “reasonable” rent, and tenants cannot contest the rent with the regional rent tribunal.  

Airbnb makes renting out your fritidshus extremely easy and on the other side makes it a lot cheaper and easier to rent a summer house for three weeks in the summer than to own one all year around.  

If you earn more than 40,000 kronor in a year from renting out your fritidshus, though, you are required to declare it to the Swedish Tax Agency. 

You can then subtract a 40,000 kronor ‘standard deduction’ from your rental revenue and a further 20 percent deduction for rental income, before it gets taxed. See the guide from the Swedish Tax Agency here. 

This means if you receive 60,000 kronor in rent, you subtract first 40,000 kronor, then 20 percent of the 60,000 kronor, which comes to 12,000 kronor.

This leaves you with 8,000 kronor to be taxed as capital income at 30 percent, leaving just 2,400 kronor in tax due. 

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