rodeo star

Due to the Current Housing Market I rented my property in the UK to a tenant.

The Inland Revenue have caught up with me and Have asked me to complete a NRL1 Form.

I dont use a Letting Agent so I am responsible for tax, if any is applicable.

Can anyone tell me if the Monthly Mortgage cost is a deduction.

HMRC and other website only refer to expenses for either Letting Agents or Tenants.

marclouis

I was advised that the interest portion is deductable, with all other expenses for the property including building insurance.

JonboyE

marclouis is correct. The interest part of the mortgage payment is allowable, as are all other expenses of renting the place such as agents fees, advertising and maintenance.

As you are a non-resident landlord your tenants should be withholding basic rate tax from the rental payments and sending this direct to HMRC. By filing the NRL1 you release them (assuming HMRC approves) from this obligation.

Don't forget that you are still entitled to a personal allowance in the UK so if the profit you earn from the rental is less than this you will not have any tax to pay.

ireland2canada

JonboyE.....I am currently trying to get my head around this very issue. Most of the info I have downloaded from the Inland Revenue refers to 'non-resident' landlords etc etc. I have checked out the P85 and the NRL1 that you mention here.

What about people who are going to Canada on a temporary basis? And are therefore not classed as 'non resident'? I am going to Canada temporarily for 12 months, so I thought that I will still be seen as a 'resident' of the UK.
I'm a little confused where this leaves me, I was going to fill out the P85 and let the IR sort it out, but I'm worried about being stung with a big tax bill or something!

I'm also confused about what I am likely to have to pay, I will not be making a profit on the house I am renting out, in fact it will cost me a small sum each month.

Any guidance would be appreciated!

JonboyE

One of the wonderful things about tax law is that the same word can mean two completely different things, depending upon the circumstances. In these circumstances (and only in these circumstances as far as I can tell) non-resident means someone who is living outside of the UK for six months or more. Therefore you should file the Form NRL1 so your tenants do not have to withhold income tax from the rent.

You will only have to pay income tax on any profit you make. Even though you are going to have a cash loss it may be a small profit for tax purposes as only the interest portion of the mortgage payments is an allowable expense. If the 12 months you spend in Canada are exactly a tax year in the UK (April-March) then it is likely that you would pay no tax at all because any profit you make on the rental would be less than your personal allowance.

If you journey straddles 2 years in the UK then what you will pay will depend upon your other earnings in those years. If you make a tax loss on the rental you might be able to offset it against other income.

ireland2canada

Right then, looks like I'm going to go with the 'bung the forms into IR and see what happens' approach then. Cheers JonboyE, much appreciated.

amardan

We rented our house in the UK and when my OH spoke to the tax office they said that we would be considered as non resident landlords as we would be away from our property for more than a year. But we would be allowed to earn £5,300 approx before having tax deducted. We do have a management company overseeing our rental but any repairs, and building insurances etc are all deductable. Also we found out that if you rent it partly furnished then we would have to pay council tax but unfurnished we do not. Now that our application is approved we do not have to have our tax deducted, all we need to do is fill out a tax return at the end of year.

bobcaygeonjon

I just want to know how the Inland Revenue "caught up" with you????????????

JonboyE

For most purposes being away from the UK for a year is the absolute minimum requirement to be non-resident. But not in this case:

'Usual place of abode'

Although we refer to 'non-resident' landlords, it is usual place of abode and not non-residence that determines whether a landlord is within the scheme or not.

In the case of individuals, we normally regard an absence from the UK of 6 months or more as meaning that a person has a usual place of abode outside the UK. It is therefore possible for a person to be resident in the UK yet, for the purposes of the scheme, to have a usual place of abode outside the UK.

http://www.hmrc.gov.uk/cnr/nr_landlords.htm#12