Sean and Louise

Hi,
If we rent out our property in the UK,do we only pay tax on the eventual profits in the uk.
Also if we rent a property in Australia , and when we eventually sell our House in the UK do we have to pay capital gains tax in australia.

Thanks Sean

jollyswagman

Hi, if you search this forum, say search "tax on house" you will have to sift through but you will find quite a lot of info. Hope this helps!

Alan Collett

It all depends ... your visa status (temporary or permanent) is the first issue to consider.

There is a free tax factsheet on Moving Overseas and Letting UK Property here:
http://www.collettandco.com/factsheet.cfm

Best regards.

sara1981

I'm an accountant (not a tax specialist though, that's a whole other set of exams!) and my advice to you would be to get professional advice on this as tax can be a VERY complex area. Eg whether you'd have to pay capital gains tax on selling the property would depend on many different factors like whether the house was your principal primary residence (assuming this is the case with you), how long it has been since you've lived in the house, how long it's been rented for etc etc.

If however it's been your house that you've lived in since you bought it and are only intending on renting it short term let's say for a year then there would be no CGT to pay and it's a very simple situation. As I said it gets more complicated the longer it's rented out and not your actual residence.

With regard to tax on rents received, you can deduct the cost of the mortgage, cost of letting eg agent's fees, and other costs relating to the upkeep of the property in arriving at the taxable profits. If you're no longer earning in the UK you'll still have your personal allowance of £5225 (2007/08 tax year) which is tax free too so you only have to pay tax on any rental profits above this amount.

In any case if you're renting out your property you'll need to submit a tax return in the UK every year or part year that it's rented out, may be easier to get a tax accountant to do this on your behalf if you're not in the country, then they can give advice (better than mine! lol) as and when you need it.

As suggested by others, you may find more information on here from a search on other posts, or look for more info at http://www.hmrc.gov.uk/

Hope this helps somewhat!

By the way, I'm not qualified to give tax or financial advice, none of the above is meant to be taken as professional advice in any way and you shouldn't make any decisions based purely on the info I have provided above (just covering myself lol!)

Fly Away

Thanks Sara!

I thought I'd read that you could chose where you paid your tax - UK or Oz and that it was beneficial to offset any losses on UK property rental in Oz because they reduced your taxable income penny for penny (cent for cent) rather than in the Uk where the loss from rented properties is ringfenced and can only be offset against income from rented properties.

Apologies if I am wrong - it is one of the things on a very long list that I have yet to look into properly as we are hoping to sell before we go, but if we can't we will ahve to let.

MartinLuther

You do have to pay tax on the rental profit to the UK taxman. You also have to pay the ATO as well (but will be credited for any tax already paid to the UK - so you don't pay twice).

You will need to fill in some UK form that says that you will pay the tax at the end of the (tax) year otherwise your tenant (or agent) is responsible for taking the tax out of the rent and paying the UK tax man. (Like that's not fraught with problems.) I don't know what the form is but I'm sure you could google it.

As for CGT it depends when you sell, how long you stay away, etc... If you move permanently then you wont be liable to UK CGT. If you rent in Aus you can sell within 6 years without any CGT penalty (in this case the UK house is still considered you principle home). If you buy in Aus the the UK house stops being your principal home and you will pay CGT on any gains made between this date and the date you sell.

MartinLuther

Rental is the one area that you can't choose. The UK taxman wants his cut and then you have to pay the ATO any extra (if there is any).

You cannot offset UK property losses against Aus property gains or Aus income. You can offset Aus property losses against Aus income.

Fly Away

Thanks MartinLuther.

Told you I hadn't looked into it properly. What a shame, we will be making a loss if we let our house out and hoped we could offset it against Oz tax.

sara1981

As you can see, it's not straight forward! Good response from MartinLuther! We are in the same position as you, and we really want to avoid renting our place out if we can to save all the hassle it involves so are leaving it empty and on the market for a few months after we go if we don't manage to sell it beforehand, if we still don't sell it then maybe we'll have to have another look at the letting scenario