Overseas Property

Paxton1978

Hi all,

Asking here because it’s incredibly hard to find someone in the tax office who can help and just want a general idea of what we’re looking at. My wife’s mother, who was a US citizen passed away (in the states) last year and left my wife a modest inheritance and a house with some mortgage still to pay. We got everything settled on the US side and now have tenants living in the property. On the first year we made a loss of $600 due to maintenance costs/mortgage payments and local taxes. This year and going forward we may make $2,000-$3,000. None of that money will ever leave the USA, so do we need to report on this with the UK tax office? Thanks in advance!

Jeremy535897

Yes you do, because assuming your wife is UK resident and domiciled, all her worldwide income is subject to UK tax, whether it is remitted here or not. The US will tax it too. The UK-US double tax agreement will give credit for the US tax paid against the UK liability on the income. She will need to claim relief on her self assessment tax return. If she does not complete a self assessment tax return, she will need to do so, unless the gross rental income is under £10,000 and she pays no UK tax on her income, for example if her personal allowance exceeds her income, and has no other reason to be required to complete one. Two further complications are that:

•  in the US the liability will be based on the calendar year, but in the UK it is based on rent received and expenses paid in the year to 5 April (unless she elects to use the accruals basis)
• the dollar receipts and payments will need converting into sterling