ColinD2

Hi
My partner Elaine and I are visiting Australia and New Zealand for up to 12 months from June this year on a 12 month holiday visa. We will be part funding our trip by renting out our two houses in the UK during our absence and this will be our only sources of income during our trip. We cannot work in Australia or New Zealand. My question is, will we need to pay any tax on the rental? We pay tax now of course, but that is because we also work and this takes us over our allowance, but in the next tax year we will not work and therefore we will be well below our allowance.

Any advice gratefully received.

Thanks

Colin

Beoz

It's still income. Of course you need to pay tax on it. How much tax is dependent on how much you make from it.

Put that value into a tax calculator. If it's really low then you might escape tax but better of getting a higher amount and paying some tax.

spouse of scouse

Hi Colin. You'll need to check with HMRC re your tax obligations while you're on holiday. You'll still be residents of the UK for tax purposes and all the usual HMRC tax rules will apply to you both. You'll still be eligible for your tax free allowance but I'd hazard a guess that even though you'll be under the tax free allowance you'd still need to report to HMRC, at the very least in the form of a self-assessment tax return after 5 April of the relevant year.

ColinD2

You're missing the point. As I've already said, the amount we will get from the rent will be well below our allowance, so if we stayed in the UK we would not pay tax full stop. However there is a scheme called non-resident landlord scheme which says that if you're resident outside the UK you pay tax on rent from properties in the UK. I guess what I'm really asking is, does a 12 month holiday to Australia on a holiday visa count as being resident outside the UK?

spouse of scouse

If the OP and his partner jointly own the rental properties, split the rental income equally and have no other taxable income, they can receive a total of up to £23,000 net rental income in a UK tax year without having to pay any tax.

spouse of scouse

No, it doesn't.

ColinD2

Thank you

spouse of scouse

You're very welcome. Enjoy your holiday!

Beoz

I think I said as much in my second paragraph.

M0zza

He wasn’t missing the point as far as I can tell. Whether you are tax resident or not is completely irrelevant. Your UK rental income subject to taxation in the UK regardless of your residency status. If your total income for the tax year falls below your personal thresholds then the tax bill is zero. Otherwise the usual tax bands apply.

The non residents form only relates to how the tax is collected, it doesn’t make any difference to the overall tax bill. Yes, I would fill it in so that tax is not automatically deducted at the source, however even if it was, this would correct itself once you complete a tax return.

louie

There are two issues here. Firstly, will you fall under the UK Non-resident Landlords Scheme? The answer seems to be yes - see 2.3. You could ring the helpline on 03000 516 644 if you wanted to discuss it with HMRC.

Secondly, will you have a liability to Australian tax on that income - or at least will you have to do an Australian tax return? I don't believe so because you will be on temporary visas so only taxable (in your circumstances) on Australian income. Not really my area though.

As for whether you will remain UK tax residents, probably, but maybe not depending on when you leave and return! There's no real avoiding have a fun time reading this - it's not as bad as it looks as you aren't being employed outside the UK. Will it matter whether you are or aren't UK tax resident? Probably not, but you will have to determine whether you are or not as it asks you on your tax returns (which you will have to complete whether or not you do now if you do fall under the NRL scheme).

Edited to add: just reread your original post and seen you are leaving in June. In that case you will almost certainly remain UK resident as you will fall foul of the second automatic UK test (1.24) in 2018/19 and won't be abroad for enough of 2019/20 to be non-UK resident.