Renting your property when you're abroad

JenIttels · 30 October 2006 at 10:59AM

My situation is thus:

My Husband to Be (H2B) owns a property where the mortgage repayments are around £550 per month. I have no stake in the property but we can put it into my name if it helps with tax.

We will soon be getting married and moving to the US for 2.5years with his job.

He currently works as a civil servant and will still be under the same terms when we're abroad (though he has the option to get paid in $ and/or £s). I will be leaving my job here and getting a job over there so will be under their tax system.

Whilst we're away we will be renting the property out using an estate agent. The rent we're likely to recieve from the property will be around £500 less the agent's fee of 15%.

We're being told differing information about how much tax we will pay on the rental income. Does anyone have idea for certain? We're relectant to approach the inland revenue as our experience with them has been a bit rubbish and even they don't seem to know for sure (call centre workers don't all agree!).

Also if we do have to pay lots of tax on the income how will it be assessed every year as we won't be resident in the UK

Many thanks.

Even if you could point me in the answer of a diffinitive answer on a web page etc i'd be grateful. Wasn't sure whether to ask here or on the tax board.

seven-day-weekend · 30 October 2006 at 11:54AM

I think you can deduct any mortgage interest paid, plus any estate agent's fees and insurances etc. and anything above that will be classed as part of your income and you will be taxed accordingly.

I don't know how they will collect the tax, sorry, although if your husband is still employed by a UK company iIthink they could do it through PAYE.

However, I am no expert - hopefully someone will be along soon who is!

Mrs_pbradley936 · 30 October 2006 at 11:57AM

When we have done this any income has just been added to our income from other sources and taxed accordingly. So that if you have for instance an extra £3000 (£500 x 12 = £3000) it is added to what you earn. You can claim some expenses such as agency fees. We did pay an accountant (and claimed his fee) but I think it is fairly simple to do yourself. A big question is where you will be domiciled ie. here or USA? We kept ours here because it was never going to be permanent.

Lstclair55 · 30 October 2006 at 9:55PM

Another thing you shudl prepare for is to complete a NRL-1 form for each person that owns the property, so if it is in joint names, you need to complete two from http://www.hmrc.gov.uk/cnr/nrl1_bw.pdf

You ideally only need to complete this if you are intending to be out of the UK for longer than 6 months, which usually would be the case. this way, if you rent it via an agent, you fill in their details and that enables them to pay over the rent received without having to deduct tax from source or if you are dealing directly with the tenant you fill in the tenant details on the form, which has the same effect. This will save a lot of hassle, etc in the long run and you get your full money instead of GB and then having to claim it back from them.

You will find even if the rent is £1,000 a month, exemption is usually granted, however if you have a bad history with the IR and don't file tax returns on time they may not grant it.

chocolatefish · 31 October 2006 at 2:20AM

We are renting out a property in the UK while living in NZ for a few years. What we have done is:

1. Obtain permission from the IR for the agent to pay you the rental income free of tax. Ask you agent about obtaining this.
2. Each year we complete a tax return (online). We have to complete the Main Form ( income from savings, investments, pensions etc), the Non-residents form (your resident status will depend on how many days you are in the UK for each year. As above we continue to be domiciled in the UK), the Property form (rental income, expenditure etc) and in our first year also the Employment form (as we worked part of that year in the UK). The online return is great as it does all the calculations for you. Keep a good track of the monthly rental statements that the agent will send you and any other property expenses you incur as you can generally claim them back.

I've generally found the IR to be helpful - especially the online / email help and the Non-residents Centre. There is heaps of info on the website for non-residents. The key is to keep in touch with them and let them know where and when you move.

JenIttels · 31 October 2006 at 12:10PM

Thanks all.

For info:
We've spoken to the Inland rev and I think we're going to split the income between us so that we only get taxed once (i won't be earning anything in the uk so my half of the income will be below my tax free allowence). Interest paid appears to be tax free and my H2B will be filling in the forms at end of financial years.

I think

abaxas · 31 October 2006 at 12:24PM

Dont forget to setup mail forwarding.

A tenant doesnt have to do anything with your mail. Personally I return everything 'not known at this address', as during my tenancy the LL has no right of occupancy.

However if the LL asked, I would be happy to 'ofset' any costs incurred in redirecting them to him/her.

Renting your property when you're abroad

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