db407

A few questions to ask planning on moving to Canada in June this year.

1. If I leave some money in my current account in UK and use my Uk debit card to withdraw the money in Canada when I need it, are there any implications in regards to tax and do I need to declare this as income
2. I have some ISA stockes and shares here in the UK. Not sure if i should sell or leave them here until whenever . It’s a bit confusing if I leave them in Uk when I decide to sell if in Canada I will have to pay tax in Canada however if I sell now and reinvest in stocks and shares in Canada it means when I sell in Canada at some point I will be liable to pay capital gains tax as the money I have is more than the allowance for the equivalent of ISA In Canada. Please can someone shed some light on how you done it
3. I plan on renting out house now. Do I tell mortgage company about move or only when I am certain of permanently staying in Canada.
4. I plan on renting the house for at least a year before I decide to sell or continue renting it in UK.

MarkG

As I understand it:

1. No, though there might be issues with capital gains if the pound goes up after you move. I haven't had to worry about that for the few thousand quid I have in the UK as I moved when the pound was at $2.10 or so.
2. Tax-free in the UK doesn't necessarily mean tax-free in Canada. And some accounts may require you to be resident in the UK. If you think you might go back, you're probably better off to leave them in the ISA until you're sure you won't.
3. Many mortgage companies won't let you rent on a residential mortgage. People do it, but you could get in trouble if they find out.
4. Make sure you fill out the relevant tax forms, if required. Penalties for not declaring offshore assets can be pretty significant, but I believe you don't need to do it for your first year in Canada.

Oh, and get a valuation on the house at the time you land here. Then you can figure out any capital loss or gain if you sell.

db407

Thanks for your quick response. I landed last year in August to activate my PR and flew back to UK after 2 weeks. I will be moving permanently in June this year. So when does the first tax year apply is it August last year or after June this year.

For house valuation Is Zoopla estimate acceptable or I will have to get an independent valuation

MarkG

I believe the value for capital gains is set when you land, not when you move over, so ideally you'd want a valuation from last August.

I'm not sure about the first year for tax purposes, so you should check with someone who knows more about that: there's a form (I think it's T1135?) where you need to list offshore assets above a certain value, so that form may explain when you need to submit it.

TheNorms

My wife is a mortgage underwriter and she has said your mortgage company will allow you to rent your residential property out but you must submit an application to your mortgage company for approval called (content to rent)
You will have to pay a fee for this it’s normally not more than a couple of hundred pounds and some lenders could add a small % rate onto your current rate. But if your making the move you should really think about remortgaging onto a BTL if your not tied into your rate.

If you do not notify them and they find out, they could find you in breach of your contract and in extreme cases they have the right to repossess the property. So for a very minimal fee and possible minimal rate change it is worth being upfront.

Look on your lenders website, you will find the relevant information and the application form. They use Zoopla as a guide but they take 10% off. Hope this helps.

Hurlabrick

Your first tax year in Canada will then be June 2018 to eo December 2018 (Canadian tax year is calendar year).

Your British tax year will be April 2018 to June 2018. If you leave the UK in June, you should be under the magic 90 days in any one tax year, below which you can be classed as non-resident. Don't forget to send in your UK P85 to tell them you are no longer resident etc.

Hurlabrick

Pretty sure that is not correct. The value for CGT is set at the date you 'land as a settler', not when you 'land to activate PR' or do a 'soft landing'.

Yes, it is T1135. You must value your overseas assets at the date you land and use the official Bank of Canada exchange rate for this (see here: https://www.bankofcanada.ca/rates/ex...xchange-rates/.

I am going through all of this at the moment with the help of a Canadian tax adviser!

glendem4

I would check with your ISA provider. Vanguard freezes your account and will not let you add or switch funds. So if you are invested in Uk funds and you want to switch into overseas funds you will not be able to do so. Hargreaves Lansdown will allow you to switch funds. Although ISA wrappers hide you from the tax man in the UK, the Canadain authorities will tax you on any worldwide gains.

Personally, I am closing up each of our ISA accounts and transferring monies into our Canadian bank account when the exchange rate is favourable. Managed to get $1.84 on the exchange on Monday.

Hurlabrick

I agree with glendem.

IMHO, best to cash in your ISA's before you come over for good, move them as normal 'cash' then buy into Canadian TFSA's and invest the remainder. It will be a PITA to keep them in the UK and to what end? You would probably end up being taxed in Canada when you do sell them on the difference in values in CAD from the date you moved to the final cash-in amount.

I had ISA's myself and did precisely that.

quiltman

What about insurance? Surely if you rent the house out, even with the mortgagees approval, the insurance company needs to be informed as in their eyes the property is now an increased risk with a tenant and they could invalidate the insurance if something happens and the OP needs to claim?

Tumbling_Dice

One has to get landlord's insurance. Different kettle of fish than the bog standard buildings and contents.

As mentioned above, consent to let is required to rent a house out and, if a reputable letting agent is used, they will likely want to see the consent letter.

Tumbling_Dice

With the ISA you can keep your investments in the wrapper but can't add money after the tax year in which you leave the UK. As another poster mentioned, though, Canada will likely want to tax you on your earnings as the ISA is not recognised in the Canadian Income Tax Act.

To mitigate, you could convert to cash before you leave the UK and, if you decide to stay in Canada, gradually move it across to a TFSA / RSP as you accumulate contribution room. Of course, the downside is that you lose out on market growth. But, if Canada is not for you, you will have preserved your built up ISA. (That is a terrible paragraph I have written but I hope you catch my meaning).

Be aware that if you bring the money across and invest in mutual funds but in a non-registered (i.e. not TFSA / RSP) account, you will be taxed on the dividends, and on 50% of the capital gain, even if just changing funds or moving money into a TFSA.

Siouxie

... and don't forget to get the house valued! Any assets (worldwide) over $100,000 must be reported and you could leave yourself open for CG if you sell it and make a profit after you move to Canada and on any increase in monitory gain you may make on the exchange rate when transferring said funds.

If you do rent it out, any profit in rental income is also liable for taxes in Canada - it's 'worldwide' income, not just what you earn in Canada.

This link may be of help to you: https://welcomepackcanada.com/blog/d...he-first-time/ for useful info and links

And others:

https://www.canada.ca/en/revenue-age...mmigrants.html

https://www.canada.ca/en/revenue-age...nada-2016.html

glendem4

TFSA limit is $5,500 per year which is poor compared to the UK ISA limit of £20,000. If you are near retirement, I would fund as much (18% of your earned income) into a Retirement Savings Plan (RSP). For 2018, the maximum contribution to an RSP is $26,230. Details can be found at What's your RRSP contribution limit? Here's the max for this year

Otherwise, I would max your personal pension/SIPP in the UK before you leave. You can go back 4 years and add £40,000 gross for each year, assuming you have earned that amount of money. Tax relief is made at your prevailing rate, so for a basic rate tax payer you only need to add £30,000 and the government will add the rest.

e.g. Assume an average salary of £27,600 with no pension contributions made over the last 4 years, then you can add £27600*0.75*4= £82,800 into your pension and the government will contribute £27,600

Snowy560

I don't think you have to do a t1135 for your first tax year.