hevs

OK. A lot of you Pm'ed me with regards to specific questions re tax implications of renting out a house in the UK and moving to Oz. Well this is what i have found out.

Firstly, you have to zero rate yourself in the Uk, this is done by filling in a form at your UK bank, making you tax exempt from the UK.

Secondly, You then have to declare any monies recieved from rent here in Oz on you end of year tax return. (Make as little profit as you can on your UK property by doing all the maintenance etc and keeping the property up to scratch.)
Its worth noting that there are some tax deductions availiable as a landlord for the need to go and check your property, things like airfares etc.

Thirdly, (and most distressingly) if you sell your UK property you WILL be charged capital gains tax on the sale of your house. This is on any profit made (from the SALE of the house)and is 40%.

This is from a knowladgable source of (new) friends of ours who own a property in the UK and overhere and are self employed, they have been here for over 10 years.

They are now looking at the possibility of changing the house into their childrens names, sending them back to blighty and giving them somewhere to stay to run amok in their teenage years! If they stay there for two years, then sell the house, its bye bye capital gains tax!!! If they don't get round it like this and they die, leaving the children the house in their will, the kids will also have to pay inheritance tax!!!!

Hope this is of some help, and please don't sue me if its wrong.
Anyone else have anything to add???

Amazulu

Not necesarily, if you had previously lived in the property, rented it out for up to 3 years, then sold it, you would not have to pay CGT. If you rent it out for more than 3 years, then sell it, you only pay CGT on value accrued after those 3 years. I've done this.

hevs

EXCELLENT news. The question was being asked by people who wanted to leave a bridge to the uk if they didn't settle. I suppose before three years they would know.

Our friends have done it for a pure investment/ pension type thing and they have elderly parents in the uk too, so its a saftey net i guess.

Amazulu

CGT in the UK is complex (luckily, I have an accountant). Get some good advice. We will be renting out some properties when we emigrate. You can't really go wrong with property in the UK.

JaneandJim

Hi Hevs,

Why do you have to zero-rate yourself in the UK? I was planning on paying the income tax in the UK. I don't have any other income so I won't be paying Oz tax anyways so my allowance should cover any difference. (Actually, at the minute I'm just breaking even, so there's mo tax to pay anyways!)

Jane

hevs

I think its because you are a non resident of the uk once you emmergrate. You will also have to do a tax return overhere regardless (i believe) and i think it just makes things easier. Anyone else??!!!
God i hate it when it gets technical

Kiwipaul

If you are talking about Oz tax it rate is not 40% but 25% (approx) so long as you've held the property for 12 months whilst in Oz. Also the CGT is only the increase in value since you have arrived in Oz, not since you've bought the house.

If you are in Oz and you transfer the house to your kids thats classed as a Capital Gain Event and so triggers the CGT which you are trying to avoid.
Suggest you take proffessional advise and NOT from a friend who thinks he knows the tax law.

Bed Of Roses

Great Post (again)!

Does the profit bit start the day you leave or is it from first purchase of the abode

hevs

no, i was talking about the english rate
I was passing on advice from someone who has lived here for ten years and has dealings with his Australian accountant on a monthly basis.
Maybe he doesn't understand the tax law, but i would have thought that his accountant would
I wasn't asking for me anyway as my property has long gone, but for people on this forum who can't get australian tax advice from the UK
You an accountant then?

Don

Some people seem to mix up half knowledge of tax liability for CGT in the UK with half knowledge of tax liability for CGT in Aus.

The key is to get properly informed and plan ahead. Could help to get good advice. At a minimum, do some reading, pllllleeeease!

You can probably avoid (legally) paying CGT in either country without doing more than planning the best date to sell the property and taking a long well-earned holiday at the right time.

renth

You're certainly not "tax exempt".

You might still have to pay tax in the UK if the income from your property exceeds your UK tax allowance(s). Even if you are in Australia.

You'll get a tax credit on your Australian tax return for it though.

Doing your tax return in Australia, remember to divide the rent/expenses/total for the rental income across you and your wife/husband's tax returns 50/50 if you jointly own it.

If your wife isn't working or working part time, your overall tax will be less than if you copped the whole lot on your return and you are working full time.

hevs

Why not??

renth

Read the second paragraph. It's unlikly to be the case for most but we will have to pay some tax in the UK as our UK rental income exceeds our UK tax free personal allowances.

hevs

Well you should have read my bit of advice properly then, make as little profit as possible Then you will be zero rated proper
Do you intend to keep your property indefinately Renth?

renth

I guess we'll sell it eventually, I'm in no rush.

If the aussie dollar weakens to what it used to be like last year then I'd be interested.