littleal

Hello - we are unlikely to sell our house and are looking at letting it out. This is a pain already but I'm starting to look at the tax implications. I know about UK tax on renting property, but I don't know where that leaves us for capital gains tax purposes, or how it affects us when we do eventually manage to sell and want to transfer the money to NZ. I know there is a four year grace period from NZ but don't understand this fully. Before I have to fork out for professional advice, has anyone been through all this?

Thanks
Alison

uk+kiwi

Haven't been through it. Will also depend on where you are deemed resident (for tax purposes).

But from my understanding the 4 year 'grace period' as you call it is for some overseas income, so not capital gains. I believe rental income is included (look it up on the nzis website - very thorough) so I believe you will not be liable for any tax on the net income from your house rental, in the UK or NZ. If you were, you could always increase your mortgage to ensure that you don't make any money (most people struggle to cover the mortage anyway so it's unlikely to be an issue).

As far as capital gains goes, I'm not sure whether you would have to pay this either if this is effectively your principal private residence in the UK. And since you have actually lived in it too, that helps. Although it probably depends on when you eventually sell it and thus how long you lived in it vs it being rented out. However, if you buy another property overseas, that may also change things, from the UK taxman's perspective anyhow. I'd call the Inland Revenue and ask. They'll know.

Sorry couldn't help more. Just adding things to consider really!

brandn

Im in the same boat with this.

You wont have to pay tax in NZ on your rent as you can take advantage of the 4 year tax break. You will be liable for some tax in the uk, you are still entitled to your personal allowance and you can right off some cost against your tax. There are special arrangements for overseas landlords which should mean you dont get hit too hard. Some info here: http://www.hmrc.gov.uk/cnr/nr_landlords.htm

As far as capital gains is concerned you should get away scot free. If you sell a property when you have left the country (and have 'not-ordinarily resident' status, which if you are not returning and leave on a one way ticket you should have) and do not return to live for 5 years then you will not have to pay capital gains. If you come back in that time you will get stung though. If this is your only uk property then it should be classed as your principle uk address which will mean that you would not be liable for capital gains when you sell it anyway.

Cheers.