Rental income from a property situated in the UK must be declared on an annual UK self-assessment tax return, even if the owner lives abroad.
You may also need to pay tax if you make a gain when you sell residential property in the UK.
In addition, a taxpayer disposing of UK residential property is required to inform HMRC within 30 days of the property being conveyed that the disposal has occurred.

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UK Statutory Residence Test

In order to determine the individual’s residency position, the ‘Statutory Residence Test’ is applied. Under this test, you are considered resident for UK tax purposes if you spend 183 days or more in the UK in a given tax year. The following non-exhaustive list of factors can also affect your UK residency position:

  • Where your main home is located
  • If you have a home in the UK
  • If you are working in the UK or abroad
  • If you have family and other ties to the UK

Non-Resident Landlords Scheme

The Non-Resident Landlords Scheme is a scheme used for taxing the UK rental income of persons whose usual place of abode is outside the UK, commonly referred to as ‘non-resident landlords’.

Non-resident landlords can off-set the tax deducted from their UK rental income under the Non-Resident Landlords Scheme against their own tax bill when they complete their UK self-assessment tax return. They can also claim repayment of any excess tax deducted from their UK rental income. Your PTI Account Manager can guide you through the process.

Non-resident landlords can also apply to HMRC to have their rental income received gross. Broadly speaking, the criteria are as follows:

UK tax affairs must be up to date
They do not have any other UK tax filing obligations
They do not expect to be liable for any UK income tax for the year in which they apply.

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It should be noted that where a non-resident landlord has successfully applied to receive the rental income gross, it does not mean that the income is exempt from UK tax; it remains taxable and a tax return must be filed for each tax year in which they receive UK rental income.

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PTI provides a wide range of UK tax services for both investors and lifestyle property owners. We’re a registered agent with HMRC and have over 20 years of experience. We provide:

  • UK PAYE income tax returns
  • UK self-assessed tax returns
  • UK self-employed tax returns
  • UK Capital Gains Tax assistance
  • UK Non-Resident Landlord Registration
  • UK request for receipt of gross rents
  • Foreign rental income returns
  • Assistance with tax payments to HMRC
  • Liaising with your tax-resident accountant

Talk to us today for a free, no obligation quote for your UK property tax requirements.

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In order to qualify as a furnished holiday letting (FHL) the accommodation must be in the UK or European Economic Area (EEA) and commercially let. You must also satisfy the following tests in order for your property to qualify as an FHL.

1. The property must be available for commercial letting as holiday accommodation to the public for at least 210 days.

2. The property must be commercially let as holiday accommodation to the public for at least 105 days.

3. The property must not be let for periods of longer-term occupation for more than 155 days during the year.

The FHL Rules

Different tax rules apply to income from letting property and income from trading. Income from letting property, including holiday lettings, is normally taxed under the property income rules, and treated as investment income. However, the FHL rules allow holiday lettings that meet certain conditions to be treated as a trade for the following tax purposes:

  • Loss relief
  • Capital allowances
  • Landlords Energy Saving Allowance (LESA)
  • Certain capital gains tax reliefs (including business asset roll-over relief, entrepreneurs’ relief, relief for gifts of business assets, relief for loans to traders and exemptions for disposals of shares by companies with a substantial shareholding)
  • Relevant UK earnings when calculating the maximum relief due for an individual’s pension contributions.

The main benefit is that any losses on an FHL can be claimed against other income, while normal property losses can only be carried forward and set against future property income. Wear and tear allowances are not available for FHLs as they qualify for capital allowances instead. There are certain transitional rules in place for FHLs in the EEA.

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FAQs

  • I rent out a number of properties. Do I have to file a tax return?
    1. If you are non-UK resident landlord, you must declare your UK property income on a UK self-assessment tax return.
    2. If you are UK tax resident , you must file a UK tax return if you are in receipt of property income of:
      • £2,500 or more after deducting allowable expenses; or
      • £10,000 or more before deducting allowable expenses

    In other cases, HMRC can make an adjustment to your PAYE code to collect any tax due on such income. Your PTI Account Manager can provide you with more information about the self-assessment system or PAYE coding.

  • What is a ‘property business’ defined as?
    • rental income and other receipts from UK land or property
    • income from letting furnished rooms in your own home
    • income from Furnished Holiday Lettings (FHL) in the UK or European Economic Area (EEA)
    • premiums from leasing UK land
    • inducements to take an interest in letting a property (a reverse premium)
  • Do I have to pay Class 2 National Insurance?
  • Class 2 National Insurance contributions are due only if the tax payer is self-employed.

    You have to pay Class 2 National Insurance if your profits are over £5,965 a year and what you do counts as running a business, for example if all the following apply:

    • being a landlord is your main job
    • you rent out more than one property
    • you’re buying new properties to rent out

    If your profits are under £5,965, you can make voluntary Class 2 National Insurance payments, for example to make sure you get the full State Pension.

    You don’t pay National Insurance if you’re not running a business – even if you do work like arranging repairs, advertising for tenants and arranging tenancy agreements.

  • Do I pay tax if I am a UK non-resident landlord?
  • You have to declare your property income and expenses on a UK self-assessment tax return. However, whether tax liability arises depends on the level of your rental business profit, the availability of specific allowances and the amount of the tax deducted at source from the gross rent received (if any).
  • What are allowable / deductible expenses?
  • Allowable expenses are things you need to spend money on in the day-to-day running of the property, like:

    • letting agents’ fees
    • legal fees for lets of a year or less, or for renewing a lease for less than 50 years
    • accountants’ fees
    • buildings and contents insurance
    • interest on property loans (please note that new rules are in force since 5 April 2017)
    • maintenance and repairs to the property (but not improvements)
    • utility bills, like gas, water and electricity
    • rent, ground rent, service charges
    • Council Tax
    • services you pay for, like cleaning or gardening
    • other direct costs of letting the property, like phone calls, stationery and advertising
  • What are the tax rules regarding capital expenditure?
  • Allowable expenses don’t include ‘capital expenditure’ – like buying a property or renovating it beyond repairs for wear and tear.

    Expenses are generally ‘capital expenses’ when you:

    • add something to the property that wasn’t there before
    • alter, improve or upgrade something that was existing
    • include the purchase of furnishings and equipment for the property

    Capital expenses aren’t allowable and can’t be claimed against your rental income but you should keep records of them as you might be able to set them against Capital Gains Tax if you sell the property in the future.

  • Yes. You must file a UK tax return if you are in receipt of property income of:

    – £2,500 or more after deducting allowable expenses; or
    – £10,000 or more before deducting allowable expenses

    In other cases, HMRC should make an adjustment to your PAYE code to collect any tax due on such income. Your PTI Account Manager can provide you with more information about the self-assessment system or PAYE codings.

  • What is Rent-a-Room relief?
  • The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

    You can let out as much of your home as you want.
    You must complete a tax return if you earn more than the threshold.

  • Are there any special tax rules for non-resident landlords?
  • You need to 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 residential property in the UK.
    If you live abroad for 6 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.

    Letting agents or tenants of a non-resident landlord must:

    • deduct tax from the landlord’s UK rental income; and
    • pay the tax to HMRC
  • Change of Capital Gains Tax for non-UK Residents from 06 April 2015
  • CGT legalisation is complex but a summary of the changes for Non Resident Landlords is as follows:

    Letting agents or tenants of a non-resident landlord must:

    • You may also need to pay tax if you make a gain when you sell residential property in the UK.
    • In addition, a taxpayer disposing of UK residential property is required to inform HMRC within 30 days of the property being conveyed that the disposal has occurred.
    • Losses on disposals of UK residential property will be ring-fenced for use against gains on other UK residential properties arising to the same non-UK resident individual in the same or future years.
    • If a non-resident becomes UK resident, any unused UK residential property losses will be available as general losses against other types of capital gain from that point.
    • If the non-resident is categorised as a UK self-assessment taxpayer, the CGT liability arising can be paid through the normal filing process. Otherwise the vendor will need to make an “advance self-assessment” and pay their tax to HMRC within 30 days.

    Your PTI Account Manager can provide more detail on the Capital Gains Tax rules.

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UK Property Tax Rates and Deadlines

Tax Year
6th Apr – 5th Apr

Income Tax Rate
20% – 45%

Income Tax Deadline
The normal filing date for a return filed online is 31 January after the end of the tax year, i.e. 31 January 2020 for 2018/19 tax year.

Capital Gains Tax Rate
Tax rates from 18% to 28%

Dual Tax Agreement with Ireland
Yes

Dual Tax Agreement with the UK
N/A

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Fixed Fee

Most tax returns can be completed on a fixed fee basis, regardless of how many supplementary pages you require.

  • The base fee is £265.00 and this covers the preparation of an income tax return involving business or property income.
  • In addition to our fixed fee structure, if your tax affairs are complicated (e.g. if you have foreign income sources and associate reliefs, share schemes or complex residency issues) or you made any chargeable disposals in the year that were subject to Capital Gains Tax, then our fee will be based on the time taken to deal with the tax return. In most cases, the fee will be no more than £400. We will always advise you of any additional fees before undertaking any work on your behalf, and we endeavour to identify any such fees when undertaking our initial review of your tax position.

An increase of £50 will be applied in the event of an urgent deadline.

What does the Fixed Fee include?

  • Completion of core self assessment tax return form.
  • Completion of all necessary supplementary pages.
  • Calculation of your tax liability or repayment.
  • Submission of the tax return to the Inland Revenue.
  • VAT

What is not included in the Fixed Fee?

  • Obtaining information from third parties
  • Organisation of supporting information, e.g. receipts
  • Tax and planning advice
  • Dealing with Inland Revenue enquiries

In such instances, we may need to increase our fees to cover the additional work involved. An estimate of the cost for this type of work will always be agreed with you in advance.

Exceptional Fees

Exceptions to our fixed fees arise when your tax affairs are especially complicated (e.g foreign income sources and associated reliefs) or you have capital gains tax liabilities. In these cases, the fee will be based on the time taken to deal with the tax return. Normally this will be no more than £325. A brief review of your tax position is needed to give a quote based on your specific circumstances. A quote will be provided in advance.

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