First time landlord - tax and mortgage questions

fluffymuffin

crickey my head is spinning with all this now. Sounds like a total nightmare.

N79 - as I understand it, as I am out of the country for one whole tax year and not back int he Uk for more than 90 days I will pay tax through the UAE system (therefore none) but I will pay tax through the Uk for any time outside of that tax year.

So what I am trying to fathom is in the year when I am paying tax through the UAE system, if I am renting my house out am I correct in thinking I pay tax on

the amount I get paid in tax - minus the expenses associated with that

and that I pay tax on the remainder of this that falls over my tax free allowance.

I don;t really understand that 20% thingy above - but I am paranoid about stuff like this plus my employer provides advice if you relocate with them so i'll be sure to check out the tax rules in detail first.

N79

Yes you still have to pay UK tax on all income rising in the UK - ie all income from your property is taxable.

If you are abroad for an entire tax year then the chances are you will be able to claim non residence for that tax year. In your original post you said that you would only be abroad for a year so I assumed that this would mean that you never spend a whole tax year abroad - hence the split treatment. Split treatment can occur in any year in which you leave the UK or become resident in the UK.

If you are non resident then remember that your aim should be to move any profits you make out of the UK before they need to be taxed. (This may not be well worded - I am advocating legal tax avoidance not illegal tax evasion) A good accountant can arrange this for you (or you could do it yourself if you know what you are doing) but for 1 property for 1 year it may not be worth the hassle.

fluffymuffin

sorry I just realised I wrote complete nonsense in that last post! I meant to put

Rent earnt - rent associated expenses = profit - tax free allowance = amount I will be taxed on

so say I earnt £550 a month in rent, over the year that would be £6600, minus any expenses. Assuming the tax free allowance is the same as it is this year (it will go up I know but just for illustration) at £6475 if my expenses are more than £125 I won't actually pay any tax on the rent as the profit is below my tax free personnal allowance.

disregarding this Non residents landlord thing which i hope to be able to sort out.

fluffymuffin

Thanks for the heads up on the Non Resident Landlord thing. This doesn't look as scary as it sounded and I think I can apply for being a non resident landlord with no tax deducted as I meet some of these criteria. I will obviously get advice and check though.

I don't really understand the concept though - becasue if I was paying tax on my income from the property anyway, why would I have to pay tax again as a non resident landlord/ Surely thats taxing twice? Anyway it seems striaghtforward as long as I sort it before I go.

Thans guys - basically I am in a situation where I don't think the rent I will get in the current market will cover my mortgage payments, I need to know how much I will get taxed so I can figure out the shortfall and if I can actually afford to go and still cover my mortgage.

Lots to think about but this is a great start thanks