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UK to Toronto, urgent tax question.

UK to Toronto, urgent tax question.

Old Nov 5th 2018, 11:09 pm
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Default UK to Toronto, urgent tax question.

hello all.

Can someone help me on this?
I have buy to let investments in the UK, after tax this is an annual income of $20,000 CAD. when I move I expect I’ll be doing low level work and earn $35,000 CAD for my Canadian job.

What exactly do I pay tax on? It seems I have to pay 20% tax on the buy to let’s in the UK, AND tax again to the Canadians for this foreign income, and then tax again on my Canadian employed income? Please help.

Last edited by Addzz120; Nov 5th 2018 at 11:12 pm.
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Old Nov 6th 2018, 12:31 am
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Default Re: UK to Toronto, urgent tax question.

Canadian employment income, tax, EI and CPP is deducted by employer.
All other income, including, including investments and foreign income is reported on a T1 tax return at the end of the year.
Report the gross amount, not the after tax amount, a claim can be made for foreign tax paid on the T1. If more tax is owing in Canada, you get to pay the difference.
CRA will provide a notice of assessment advising of any tax you owe them.

World income is reportable in Canada and is likely subject to tax, along with employment income. Some expenses are often deductible against rental income.

If applicable, remember to file a T1135, expensive to forget this if it is due. If any properties are sold, this could trigger a capital gain. Hopefully you had a valuation of these properties at the time you took up tax residency in Canada.

Everyone's finances are different, if it were me, I would be consulting an accountant and getting professional advice before the tax year end to make sure I had the correct information and filed correctly. If you are not a tax resident of Canada yet, I would get any foreign assets valued just before taking up tax residency.

Last edited by Aviator; Nov 6th 2018 at 12:48 am.
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Old Nov 6th 2018, 1:45 am
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Aviator
Canadian employment income, tax, EI and CPP is deducted by employer.
All other income, including, including investments and foreign income is reported on a T1 tax return at the end of the year.
Report the gross amount, not the after tax amount, a claim can be made for foreign tax paid on the T1. If more tax is owing in Canada, you get to pay the difference.
CRA will provide a notice of assessment advising of any tax you owe them.

World income is reportable in Canada and is likely subject to tax, along with employment income. Some expenses are often deductible against rental income.

If applicable, remember to file a T1135, expensive to forget this if it is due. If any properties are sold, this could trigger a capital gain. Hopefully you had a valuation of these properties at the time you took up tax residency in Canada.

Everyone's finances are different, if it were me, I would be consulting an accountant and getting professional advice before the tax year end to make sure I had the correct information and filed correctly. If you are not a tax resident of Canada yet, I would get any foreign assets valued just before taking up tax residency.
Thanks or the reply, I’m grateful.
So the employer takes the tax off the employed income, I didn’t realise that.
My property values are recent and known, I’m relatively young so I’d be holding them for potentially 30 years, good point on the CGT though. I can accept that as I’d get it in the UK anyway.
My property taxes here are 20%, the gross figure would be about 10% tax bracket for Ontario. I’ve already paid a higher rate of tax than Canada would take. Surely they cannot add their 10% on top of the British 20%, that would break the double tax rule? I can understand if tax here was 10% and 20% in Canada, therefore I’d be liable to pay an additional 10%.
I assume it’s not always as a simple as foreign income = guaranteed tax in Canada, if I’m paying a higher percentage already in Britain. Unless it has to be paid to then be returned once it’s shown I’ve paid a higher rate in the original tax territory,
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Old Nov 6th 2018, 10:15 pm
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Default Re: UK to Toronto, urgent tax question.

Property values being known may, or may not be enough for CRA, it depends how you arrived at the valuations, what documentation you have to support it and how recent any valuations were to the time you become a tax resident of Canada.
By 'property taxes' I assume you mean tax on rental income?

Employer takes tax off income from CRA tables based on earnings in each pay period. This is the basic amount, but if other income puts the taxpayer into a higher tax level, there may still be tax owing.
Investments and other income are reported on T1 tax return between Dec 31 and April 15. Self employed income allows for June 15 filing, but if tax is owing, interest is charged by CRA from April 15.
On T1 return, taxpayer can claim legitimate expenses for business income (not employment income), also claim for foreign tax paid (with proof of payment).
Any foreign income has to be reported before tax deductions in source country.

In Canada we have two govt. levels of tax, provincial income tax and federal income tax, both of which have to be paid. Tax is based on total income rather than each source taxed individually. Most income, earned and investment is taxed at marginal rate, CGT is marginal rate on 50% of gain.

A taxpayer in Canada is subject to report their gross world income (before any foriegn tax has been deducted). Regardless of whether they are taxed in another country or not. Applying for relief on tax paid in a country with a tax treaty, with the correct documentation would likely be successful, but nothing is ever certain. Tax paid in another country does not equal a certainty of no tax paid in Canada.

https://www.canada.ca/en/revenue-age...ous-years.html

I believe property sold in the UK is subject to CGT for all non residents now, as well as being taxable in Canada.

This is an over simplistic description and may or may not be correct. I would definitely be engaging an accountant to handle my tax affairs.

There are many to choose from MNP are a national firm https://www.mnp.ca/en/offices/toronto

From my experience I would stick to a professional accountant and not a tax filer.
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Old Nov 10th 2018, 2:58 am
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Default Re: UK to Toronto, urgent tax question.

Does anyone know if it's worth engaging an accountant that could deal with BOTH UK and Canadian tax returns together? (I know that the tax year's don't line up)

I'm going to need a split year in the UK and it's going to get messy as I'm likely to return there for work for a few weeks in January.
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Old Nov 16th 2018, 6:19 am
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Default Re: UK to Toronto, urgent tax question.

Easiest way to do it is file a non resident landlord declaration in the UK. You can then receive your rental income without tax in the UK, you declare it on your Canadian tax return and pay tax here. All you need to do then is file a UK self assessment each year and prove that you declared the income to Canada Revenue and paid the Canadian tax on it (your notice of assessment will suffice). The tax years do not align so the way I did it was just to put a note in with my UK return stating just that and that i'd include Jan-Apr in the following year, it didn't really matter anyway as no tax is owed to the UK because you pay it all to Canada.

It doesn't matter if one country has a higher rate of tax than the other, you can't choose which country's tax to pay, you pay the rate where you're tax resident and the other country gets nothing. So if for arguments sake CGT is 20% in the UK and 15% in Canada, if you're tax resident in Canada you abide by those rules, so you pay 15% and the UK won't be asking for that extra 5% because you aren't UK tax resident but you have to prove you're paying tax on it to Canada.

Last edited by Kiowan; Nov 16th 2018 at 6:25 am.
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Old Nov 16th 2018, 2:38 pm
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Default Re: UK to Toronto, urgent tax question.

Thank you both for your responses. I have a lot to think about!

Kiowan, interesting thanks. However as of 2020 I think it is, you can claim back the basic 20% of the mortgage interest in the UK. Does candada have a similar process otherwise you’d lose that tax relief and be worse off even if the rate of tax overall is slightly less than the UK. I think ow you can claim back half or 25% mortgage interest but if I’m not mistaken next year of the year after it’s just a flat 20%.
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Old Nov 16th 2018, 3:06 pm
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Addzz120
Thank you both for your responses. I have a lot to think about!

Kiowan, interesting thanks. However as of 2020 I think it is, you can claim back the basic 20% of the mortgage interest in the UK. Does Canada have a similar process otherwise you’d lose that tax relief and be worse off even if the rate of tax overall is slightly less than the UK. I think ow you can claim back half or 25% mortgage interest but if I’m not mistaken next year of the year after it’s just a flat 20%.
If a property is a rental, reasonable expenses can be claimed, maintenance, management fees if you have an agency handle the rental, mortgage interest charged in the tax year, professional fees etc. The interest is deducted from income and helps to reduce the tax bill. All taxes must be filed by June 15 for the preceding year. Best to file by April 30 though, as interest accrues on taxes owed from April 30 each year.
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Old Nov 16th 2018, 3:52 pm
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Aviator
If a property is a rental, reasonable expenses can be claimed, maintenance, management fees if you have an agency handle the rental, mortgage interest charged in the tax year, professional fees etc. The interest is deducted from income and helps to reduce the tax bill. All taxes must be filed by June 15 for the preceding year. Best to file by April 30 though, as interest accrues on taxes owed from April 30 each year.
You’re a life saver thanks so much. I can’t tell you how much this has been giving me a headache since deciding to move to Canada. I think under the new UK changes those expenses like management fees can’t be reclaimed anymore so that’s a bonus if the Canadian system allows that.
if I could intrude with one further question - what % of mortgage interest can be claimed in Canada? It used to be all in the UK now it’s being phased out.

Last edited by Addzz120; Nov 16th 2018 at 3:56 pm.
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Old Nov 16th 2018, 4:51 pm
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Addzz120


You’re a life saver thanks so much. I can’t tell you how much this has been giving me a headache since deciding to move to Canada. I think under the new UK changes those expenses like management fees can’t be reclaimed anymore so that’s a bonus if the Canadian system allows that.
if I could intrude with one further question - what % of mortgage interest can be claimed in Canada? It used to be all in the UK now it’s being phased out.
If the sole purpose of the property is a rental, as far as I know all of the interest charged during the tax year that the property is used for rental purposes as this should be considered a business expense. Once you are in Canada, it would be advisable to get an accountant to advise you and prepare your tax return. There is no substitute for professional advice in my view. Rental property in no different to any other business enterprise (except you have to deal with Nantes!).
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Old Nov 16th 2018, 6:29 pm
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Aviator
If the sole purpose of the property is a rental, as far as I know all of the interest charged during the tax year that the property is used for rental purposes as this should be considered a business expense. Once you are in Canada, it would be advisable to get an accountant to advise you and prepare your tax return. There is no substitute for professional advice in my view. Rental property in no different to any other business enterprise (except you have to deal with Nantes!).
That’s amazing! I’ll have a bit more money than I thought. Seems that’s the case on a few sites I visited after your reply.....huge bonus. I completely agree, my tax knowledge is poor and I’ll take your advice on the accountant for sure.
sorry, Nantes?
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Old Nov 16th 2018, 6:43 pm
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Addzz120


That’s amazing! I’ll have a bit more money than I thought. Seems that’s the case on a few sites I visited after your reply.....huge bonus. I completely agree, my tax knowledge is poor and I’ll take your advice on the accountant for sure.
sorry, Nantes?
No worries. I am not an accountant, so get all this checked out, this is just my understanding.
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Old Nov 16th 2018, 7:41 pm
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Default Re: UK to Toronto, urgent tax question.

I claim all mortgage interest as an expense, so the rules are more beneficial here than the UK.
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Old Nov 17th 2018, 12:10 am
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Kiowan
I claim all mortgage interest as an expense, so the rules are more beneficial here than the UK.
music to my ears! The master plan takes shape

last agenda item, to be violated by a doctor for the medical exam.....

tally ho....
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Old Nov 17th 2018, 12:19 am
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Default Re: UK to Toronto, urgent tax question.

Originally Posted by Addzz120


music to my ears! The master plan takes shape

last agenda item, to be violated by a doctor for the medical exam.....

tally ho....
That is not a deductible expense!
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