Hi,

We are planning on relocating to Kelowna in April next year, my husband is a Canadian Citizern and I have my PR.

Ideally we would like to rent out our house in the UK rather than sell (the house is just in my name. But I am unsure on how much tax I would need to pay, I have researched the web and get more confused the more I read!

I won't be making any profit from the rental income as it will just be covering the mortgage, I may even have to put in some money to cover it!

Mortgage payment will be £950 and rental income will be £850-£900 per month.

Do I really have to pay 20% tax on this, if I am resident in Canada?

Any help/advice would be greatly received.

We did put our house on the market to test the water and recreceived offer over the asking price, but I am reluclant to sell just incase it doesn't work out in Canada and we need to come back (sorry not trying to be negative....but realistic) plus I would rather have a long term investment here.

Ramble over!

Thanks

http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-11e.pdf

Link attached to the tax rules. Simply put you pay tax on profit - rental income less approved expenses, when your overall income is over a certain amount. Good luck with your move.

As previously noted you only pay tax on any profit (ie rent less mortgage interest but not the principal repayment portion of any payments, and any other expenses such as buildings insurance, repairs, letting agent fees, etc). I think you can also set your personal allawance against this, so you will only pay tax if the profits are above about 7,500 personal allowance.

However to avoid tax being deducted at source from you rental receipts you need to complete a NRL1 form and send it to the HMRC for them to approve. If you don't send the form (or don't get approval) then you letting agents will have to deduct 20% from the rental receipts and send it to the HMRC. You will then need to recover this at the end of the tax year when you submit a tax return. The form can be downloaded from the HMRC website.

You'll need to file a UK self assessment each year stating the rental details.
You pay tax on the rental income minus interest payments.

So if your mortgage interest is greater than rental income, you pay no tax. If not, you'll pay tax on that.

If you pay tax on it in the UK, you won't pay tax on it in Canada......and visa versa.

You will need to report any foreign income and assets over $100k on your Canadian tax return. This gets added to your annual income to determine if you any any tax.legitimate expenses can be deducted. Only mortgage interest is a ligitmate deduction, not repayment of principal. so you may be making more profit than you think.

Also see this post, http://britishexpats.com/forum/showt...2#post10238472

Capital gains tax may apply if and when you sell the property.

You do have to include any foreign income on your tax return in Canada and claim for foreign tax paid (proof required). If tax in Canada is higher than you paid in the UK, you pay the difference.

Yep there is that too.

To the OP, get an accountant in Canada for your first year.

I'm taking it for this scenario (renting out your UK property whilst in Canada), if you have a mortgage on your UK property, you have to pay tax on the monthly capital repayment and can only claim tax relief on the interest the mortgage company is charging. therefore if your mortgage is £800 per month (and you are paying 5% interest of the mortgage over the term) and you have a tenant paying £800 per month, you are only entitled to claim the interest back (5%) and not the capital???
Wow, that could become expensive as you will have capital mortgage repayment in the UK plus rental in Canada to pay for. I had assumed you could rent out the property for the monthly mortgage value without having to pay any tax in UK or Canada (you would be braking even!).

The calculation from a Canadian point of view is:

Rent received - mortgage interest - insurance - repairs - letting agent's fees.

In the UK you can also deduct a wear a tear allowance. You can deduct something similar in Canada but in most cases it is better not to.

Join the non-resident landlord's scheme in the UK and as long as the profit from the above calculation is less than your personal allowance you will not have any UK tax to pay. You will not need to file tax returns in the UK unless HMRC ask for them.

Any profit from the above calculation is added to your income in Canada and is taxable.

We kept our house and after a couple of years here we got the forms filled in and no longer pay the tax to UK government on the income we receive less expenses However we retained the services of our UK Accountants we had for our business and submit tax returns every year and have also retained services of an accountant here too (large firm of Chartered Accounts who are experienced in this) and pay tax on our income in UK in Canada.

BTW we are now please we kept the house because any investment we have had in UK via pensions and "other" have basically tanked whereas our house increased in value over the 12 years. We did get a valuation of the house before we moved which we have on file in case we have to pay CGT some time in the future.

Now we are maybe moving back sometime in the future and at least still have our home there!

el_richo - does this apply to any other EU country or UK only? Thank you.

If they have an agreement with each other, you'll only pay tax in on country although if it's lower in the EU country you will top it up in Canada if the tax would be higher.

Thank you. Will check this.

Tha authority to claim a tax credit in Canada for foreign income taxes paid is set out in the (Canadian) Income Tax Act. It is not dependent on there being a tax treaty between Canada and another country.

Tax treaties set out the rules for deciding where someone is resident for tax purposes, which country is entitled to tax income arising in that country and, sometimes, the rate of tax they can charge.