TaviraTrog

As our house hasn't sold yet we have decided to let it and move out to Tavira in December. Can anyone tell me what the tax situation is with income from letting a house in UK when one is resident in Portugal?

Mitzyboy

If you let through an agency when you no longer reside in the UK apparantly they are bound to withold tax from your rent. That was the position when we looked at it anyway. However when you are a foreign resident you should be paying tax here, not there so that a bit confusing!

TaviraTrog

Yes, I've had conflicting advice on this. One agent said we pay UK tax and another that we had to apply for an exemption certificate from the Revenue and pay Portuguese tax on it. What is the rate of tax over there?

I've been onto the Revenue's website but can't find any info there so I've emailed them with my query. I got an automated reply saying they would reply within 5 days.

ClaireS

It depends on whether you will officially lose your UK tax residency in December - in order to officially lose it you will need to fill in various forms to support the fact that you are leaving the UK permanently and that you won´t meet the 183 days / year or 90 on average over four years tests. As an official non UK resident you are entitled to receive the rental income gross under the non-resident landlord scheme however you will still be liable to file a tax return and pay UK tax on this income (less relevant expenses) as it is UK source income.

As you are becoming a Portuguese resident (I assume you are spending more than 183 days a year here) then you will be liable to Portuguese income tax on your worldwide income which technically means that you need to declare the UK rental income on your Portuguese tax return however you will get double tax relief for the UK tax paid though you may need to pay a top up if the Portuguese liability works out more than the UK liability.

It is advisable to speak to someone prior to cutting tax ties with the UK as there may be implications for any other UK assets owned or earnt income that you have.

TaviraTrog

Claire,

thanks for that - I think. It's more complicated than it first seemed. My brother is an accountant and I'm meeting up with him next month at his son's wedding; I think I'll see if he has any advice (for free)

jdr

Don`t forget the tax if you sell also as it won`t be your main residence. ;-))

scrubbedexpat008

TT OB,

ClaireS is pretty much spot on. We have a place in the UK rented out and declare the income on UK self-assessment. If the property is in joint names split the income and expenses between you to minimise tax liability. Make sure you keep a list and receipts for EVERY expense from agent's fees, through mortgage interest to cleaning bills etc. A simple Excel spreadsheet will do the trick and we were surprised at the total cost for the first year.

We receive the gross rent direct as non-resident landlords.

When we are plugged in to the Portuguese tax system then our "normal" pension income (currently on UK PAYE) will come out from UK tax and into the local system, and we expect to be better off as a result due to the different way that pensions are taxed over here.

I recommend talking with one of the organisations that specialise in Portuguese / expat financial / tax matters before the end of this year. It may cost you a few bob but should save you much more and let you sleep at night.

Good luck.

Graeme

derbyflan

Not wishing to sound too ignorant - but are the laws about to change at the end of this year?

We will also be non-resident landlords with a property in Scotland when we relocate to PT hopefully around this time next year.

TaviraTrog

GRC

When you say surprised, do you mean pleasantly or was it a nasty surprise?

scrubbedexpat008

Both! The expenses were quite high (several thousand pounds) but this reduced our tax liability to very little .

So, overall, pleasantly surprised.

GRC

derbyflan

Any takers on this question please?

scrubbedexpat008

Which laws specifically? Have you heard something? I haven't.

GRC