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non resident landlord scheme, rental income taxation help

non resident landlord scheme, rental income taxation help

Old Mar 9th 2013, 9:27 am
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Default non resident landlord scheme, rental income taxation help

Guys

I cant get a search on this but if anyone knows can you please point me in the right direction

I am a new soon to be expat and I have a house in the UK which I intend to rent out thus it will not be available for my use.

I have looked into the Non Resident Landlord Scheme which appears to apply to my situation - does anyone use this?

If so, I presume that because I am non-resident in the UK for tax that I am not entitled to a personal income tax allowance meaning all rental income would be subject to taxation. what rate would this be at, 20%?

It looks as though my tentant deducts 20% from the rent due and pays this tax direct to HMRC for me unless I am approved for the Landlord scheme?

Any pointers would be great, thanks
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Old Mar 9th 2013, 9:29 am
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Default Re: non resident landlord scheme, rental income taxation help

You trust your tenant to pay 20% to the government?

Really?
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Old Mar 9th 2013, 9:41 am
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Default Re: non resident landlord scheme, rental income taxation help

lol, there is no issue with trust there

Last edited by Graduate QS; Mar 9th 2013 at 9:48 am.
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Old Mar 9th 2013, 12:26 pm
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Default Re: non resident landlord scheme, rental income taxation help

Not sure that's how it will work from April 1st, look at earlier information from Meow
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Old Mar 9th 2013, 12:30 pm
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by Graduate QS
Guys

I cant get a search on this but if anyone knows can you please point me in the right direction

I am a new soon to be expat and I have a house in the UK which I intend to rent out thus it will not be available for my use.

I have looked into the Non Resident Landlord Scheme which appears to apply to my situation - does anyone use this?

If so, I presume that because I am non-resident in the UK for tax that I am not entitled to a personal income tax allowance meaning all rental income would be subject to taxation. what rate would this be at, 20%?

It looks as though my tentant deducts 20% from the rent due and pays this tax direct to HMRC for me unless I am approved for the Landlord scheme?

Any pointers would be great, thanks

As a non-resident you are still entitled to a personal allowance, so only rental income above that level is taxable.

Your tenant does not pay the tax if you register for a Non Resident LL scheme, rather you receive income gross and are liable for any tax your self.

Other relevant info can be found on my financial blog - link below.
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Old Mar 11th 2013, 7:43 am
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Default Re: non resident landlord scheme, rental income taxation help

Hi Meow, that's a really informative and useful blog you run there. I've just read your article on non resident landlord status - can mortgage payments be offset against your personal allowance? So if I receive 10k a year in rent from a UK property but my mortgage is 8k, am I only liable for tax on the 2k (which would fall within my allowance anyway)?

Thanks

B
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Old Mar 11th 2013, 7:50 am
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by mrblast
Hi Meow, that's a really informative and useful blog you run there. I've just read your article on non resident landlord status - can mortgage payments be offset against your personal allowance? So if I receive 10k a year in rent from a UK property but my mortgage is 8k, am I only liable for tax on the 2k (which would fall within my allowance anyway)?

Thanks

B
You can't off-set the whole mortgage amount from the rental income. You can only off-set the interest portion. With current low interest rates thats probably not very much ! The HMR tax form guide is very informative and provides all the information you need to know.
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Old Mar 11th 2013, 10:58 am
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by mrblast
Hi Meow, that's a really informative and useful blog you run there. I've just read your article on non resident landlord status - can mortgage payments be offset against your personal allowance? So if I receive 10k a year in rent from a UK property but my mortgage is 8k, am I only liable for tax on the 2k (which would fall within my allowance anyway)?

Thanks

B

Do you mean can rental income be part of your personal allowance? If so, yes. Rental income is UK income, but the gross amount can be reduced by both mortgage interest payments and some other costs.

http://www.hmrc.gov.uk/international/nr-landlords.htm


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Old Mar 11th 2013, 11:49 am
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Default Re: non resident landlord scheme, rental income taxation help

Mrblast, i don't think you can offset your mortgage payments against your rental income. I think you can so something like that in Oz though?
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Old Mar 11th 2013, 11:49 am
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by al dente
Mrblast, i don't think you can offset your mortgage payments against your rental income. I think you can so something like that in Oz though?
You can offset mortgage interest and various other associated costs.
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Old Mar 11th 2013, 12:12 pm
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by Meow
You can offset mortgage interest and various other associated costs.
Yes but that's so little nowadays, I meant that I didn't think the whole payment could be offset. Not that I want a higher interest rate, mind!!
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Old Mar 11th 2013, 12:14 pm
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by al dente
Yes but that's so little nowadays, I meant that I didn't think the whole payment could be offset. Not that I want a higher interest rate, mind!!
Depends on the size of the mortgage and many people who let their property are being charged a higher rate of interest. Rates are very low compared to historical levels though.
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Old Mar 11th 2013, 12:56 pm
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by Meow
You can offset mortgage interest and various other associated costs.
keep your builders invoices/receipts!!!
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Old Mar 11th 2013, 1:08 pm
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by Meow
You can offset mortgage interest and various other associated costs.
What about council tax? If the landlord pays this, can it be partly or wholly used to offset income tax?
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Old Mar 11th 2013, 1:13 pm
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Default Re: non resident landlord scheme, rental income taxation help

Originally Posted by Miss Anne Thrope
What about council tax? If the landlord pays this, can it be partly or wholly used to offset income tax?
Spooky. I've just had an email from someone with almost the same question.

Allowable expenses include:
  • water rates, council tax, gas and electricity
  • maintenance and repairs to the property (but not improvements)
  • and contents insurance
  • interest on a mortgage to buy the property
  • costs of services, including the wages of gardeners and cleaners
  • letting agents fees
  • legal fees for lets of a year or less, or for renewing a lease of less than 50 years
  • accountant’s fees
  • rents, ground rents and service charges
  • other direct costs such as phone calls, stationery and advertising for new tenants

The expense should be incurred wholly and exclusively as a result of renting out your property, but in many cases the tenant pays the council tax so it's academic.
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