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What are the tax implications for non-UK resident property owners?

There are a whole host of reasons why British citizens choose to pack up their life in the UK and emigrate abroad. 

Whether it’s to improve the quality of their family’s life, reduce the cost of living, relocate for work or simply fancy a change of scenery, migrating overseas continues to be a popular choice for many of the UK population.

So much so that research for the Office of National Statistics found around 397,000 people emigrated from the UK in 2019 alone – that’s well over 1,000 people a day.

And while countries such as Australia, the USA, Spain and New Zealand continue to remain among the most popular destinations for emigrating UK expats. 

There are a growing number of expats who are calling Southeast Asia their home. With increasing connectivity, ever-improving digital infrastructure, and an intoxicating way of life, it’s easy to see why the likes of Thailand, Vietnam, the Philippines, Malaysia and Singapore are presenting an exciting lifestyle challenge.

While the idea of packing up your bags and beginning a new chapter of life abroad can be pretty exciting, you shouldn’t forget that you will still fall under the demands of HMRC and could be accountable for paying taxes if you are receiving any form of income from a UK property rental.

So in this article, we’re going to look at the tax implications for non-UK resident property owners and how a specialist professional tax consultant like The Taxman UK can be of assistance and help you avoid paying unnecessary taxes.

What you need to know

Once you leave the UK, you need to remember that you will generally have to pay tax on any UK income, even if you’re not a UK resident; on things like:

  • pension
  • rental income
  • savings interest
  • wages

If you’re eligible for a Personal Allowance, you pay Income Tax on your income above that amount. Otherwise, you pay tax on any other income.

Also, you need to understand if the country where you choose to live will tax you on your UK income. However, if it has a ‘double-taxation agreement‘ with the UK, you can claim tax relief in the UK to avoid being taxed twice.

Lastly, you do not usually pay tax when selling an asset, except on UK property or land; however, it’s always worth speaking to the professionals like The Taxman UK in case there is an issue regarding CGT – Capital Gains Tax.

Tax on residential rental income

You must pay tax on your rental income if you rent out a property in the UK. You may also need to pay tax if you make a gain when you sell property or land in the UK.

If you live abroad for six months or more per year, you’re classed as a ‘non-resident landlord’ by HM Revenue and Customs (HMRC) – even if you’re a UK resident for tax purposes.

Renting property through companies or trusts

In certain instances, the property you own and rent to a third party might be considered a company asset, but that does not mean you are exempt from paying tax. 

A company is a ‘non-resident landlord’ if it receives income from renting UK property and either its principal office or business premises are outside the UK, or the company is incorporated outside the UK.

The company can receive its rent in full if it’s resident in the UK for tax purposes – this includes UK branches of companies based abroad as long as they are registered for Corporation Tax.

A trust is also considered a ‘non-resident landlord’ if it receives income from renting UK property, and all trustees usually live outside the UK.

Various ways to pay your tax on a property income

You can pay the tax on a residential property income in various ways. You can receive your rent in full and pay tax through Self Assessment – if HMRC allows you to do this or with tax already deducted by your letting agent or tenant – for more information on how to go about this, talk to the team at The Taxman UK.

Receive your rent in full

If you want to pay tax on your rental income through Self Assessment, you must complete form NRL1i and return it to HMRC; again, The Taxman UK can help and advise you on how to apply.

If your application is approved, then HMRC will advise your letting agent or tenant not to deduct tax from your rent, and you will be required to declare your income via your Self Assessment tax return.

However, HMRC will not approve your application if, for any reason, your taxes are not up to date; for example, you’re late filing your tax returns or payments.

Deducting tax at the source

If you prefer, then your letting agent or tenant can deduct the basic rate tax from your rent (after allowing for any expenses they’ve paid), but to do so, they are required to provide you with a certificate at the end of the tax year confirming the net rent paid to you and the amount of tax they deducted and paid over to HMRC.

However, if you do not have a letting agent and your tenant pays you more than £100 a week in rent, then HMRC will allow you to deduct the tax amount from the rental payments made to you.

Completing and filing your tax return

Unless, for some reason that the HMRC tells you not to, you will need to declare your property rental income in a Self Assessment tax return where you need to complete the ‘residence’ and the ‘property’ sections. The tax return you file should be for the year April 5th to 6 April of the following year, and you should make it clear for which year you are filing the return.

For this process, you cannot use HMRC’s online services. Instead, you need to either send your tax return by post, use commercial software or, as we would advise, speak to The Taxman UK and let them help make life less taxing.

Why choose The Taxman UK

The Taxman UK has provided personalised online taxation services to non-residents since 2000. Led by a management team that has previously worked in the UK for HMRC, KPMG and Baker Tilly, The Taxman UK has the expertise to solve a wide variety of UK tax issues for international clients.

Their fresh approach and depth of thinking mean they are well equipped to handle all your UK taxation needs, no matter how complex, whether you require assistance to complete an annual Tax Return or want more specific tax advice. 

To learn more about The Taxman UK and the range of services they offer, visit www.thetaxmanuk.com.