Ed asks: “I live abroad, earning and paying tax there. We pay no tax on our income in the UK, and we don’t submit a tax return. Should we be paying tax on the earnings for our property in the UK?”
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Q&A 54 – Taxes On UK Property When Living Abroad – Shownotes
Today’s question comes from Ed:
I live abroad, earning and paying tax there.
The rent for our 1 bed flat in the UK pays for the mortgage (interest-only) and the standard upkeep of the building without needing extra money from us. Occasional expenses crop up here and there when our tenant needs something fixed.
We pay no tax on our income in the UK, and we don’t submit a tax return.
Should we setting our expenses for the property off against tax? Can we even do that? Where? How?
My gut says that we face all the burden of this alone, facing bills and running costs without any reductions or help from the tax man.
Am I right?
Ed, bad news I’m afraid – you may need to submit a tax return (although it does depend on your profits).
Income Limits For Self Assessment
If this is the ONLY income you are earning in the UK, then you need to compare your profits from your property against the following condition:
“You must report income from property rental on a Self Assessment tax return if it’s:
- £2,500 to £9,999 after allowable expenses
- £10,000 or more before allowable expenses
I imagine from your question – you say that the rent covers the mortgage – that your profits may be less than £2,500 AND your income may be less than the £10,000 limit. However, you need to measure your profits in the same way that the HMRC does, which for yourself will be your rental income, less your mortgage interest, less other allowable expenses.
Allowable 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
- accountants’ fees
- buildings and contents insurance
- maintenance and repairs to the property (but not improvements)
- Council Tax
- etc
If you are under these limits, then you only need to call the Self-Assessment Helpline and inform them of your situation.
However, if you fall above either of these limits, you’ll need to complete a self-assessment tax return with a summary of your income and allowable expenses completed on the appropriate submission form which again you can find on the HMRC website.
Luckily, the process for submitting a self-assessment return has become much easier over the past 3-5 years and now most can be completed online with minimal hassle.
Ask Your Question
This show runs three times a week and answers all of your personal finance questions. If you have any questions, please don’t be shy to ask. You can ask in three ways:
- Leave a comment on any of the Q&A podcast shownotes (including this one)
- Email me at moneystepper@gmail.com
- Leave a message on the Speakpipe App which you will find below and on our “submit a question” page:
Hi,
I had an argument with HMRC before on this topic (and lost..).
HMRC claim if you are a landlord who is not tax resident of the UK you must file a UK tax return (regardless of the level of profits or expenses). They sited this HMRC page (the 5th point on other circumstances):
http://www.hmrc.gov.uk/manuals/sammanual/sam100050.htm
Seems strange (especially when there is a loss) but HMRC were insistent those were the rules.
Excellent – thanks for comment. Always good to know what happens in real cases with the HMRC as there advice is often conflicting in certain areas.