MichaelandDawn

I have just had my local Uk estate agent round to our 2 bed semi bungalow, to get an idea on what rental income we can achieve p/month, and also what implications tax wise it has on us.

Whilst the lady was informative, and left me different bits to read. I still feel a little in the dark with regards to tax implications on my Uk house.

I think the inland revenue see it as an income ( our UK rental ) and therefore tax us on it.

We will be living permamently in Spain, renting an apartment or similar, and i wondered how the Uk will tax us.

We will be getting approx £600 per month from rental income, and our mortgage is slightly higher, so will have to "bridge the gap" with our own funds. Is this extra uncovered amount something we can claim as an "expense" when we came to do our tax return?? The estate agent said "is there any way you can be exempt from paying tax" I said we would be working abroad, running a business, and obviously we are liable to pay tax on that in Spain.

It seems excessive that not only do we have to pay tax in Spain ( which i am totally fine about, and happy to do ) - we are living there afterall !! but yet we have to pay the estate agents letting "fee" and also pay tax on the house.

If anyone can shed any light on it for me, i promise to stop waffling

xx

MichaelandDawn

Just been on the HMRC website. Understand it a little better. But still need to know.

What can be classed as expenses??

What % rate do they use to calculate tax?

I hear that the exempt tax amount is if you are receiving £100 p/week or less rental income, so do we just get taxed on the extra bit??

valenciatim

Your expenses will be the mortgage, bills, and fees which can all be offset against the tax bill, so in this case, there should be no tax due in the UK. You MAY have to pay tax on it is Spain though as an asset!
Tim

EsuriJohn

If you are "tax resident" in Spain you are taxed on your worldwide assets when assesing your wealth tax. So if you UK property was worth £100k then that would be added to you Spanish assests say £300k to give a worldwide total of £400k

Mitzyboy

You'll be subject to Spanish tax laws / payments here won't you, not UK. You dont have to pay tax twice as there is a reciprocal arrangement.

bil

I think you will have to pay tax in the UK if the tax that you would have paid there is less than the tax you would have paid in Spain on it.

Best get professional advice. It will be cheaper in the long run.

Bear in mind other tax implications. If you wish to sell your house in the future, it will no longer be your principle private residence, and will then be liable to capital gains tax.

EsuriJohn

But UK rental income is always taxed in UK for UK domiciled people so there is a double hit income in UK and wealth in Spain. However the UK tax man does allow a lot of expenses to be set against the income so a good tax advisor would probably reduce the tax due to zero or as close to as makes no difference after your personal allowance or two if you split the rental income between husband and wife.

valenciatim

Can I just point out that the original poster stated that the mortgage was more than the rental income, add to that the cost of agents and maintenance,and there will be no tax burden in the UK.
Tim

EsuriJohn

I thought that it was only the interest on the mortgage that was allowed its complicated because the property was the principle private residence and not bought on motgage as a buy to let.

Chiclanagir

We are in the same position and rent out our property in the UK for about the same amount although no mortgage on it. You still can get your personal allowances and then deduct your expenses, i.e. interest on your mortgage payments, insurance, upkeep, if furnished normally 10% of the income, costs of agents fees, phone calls stamps etc. You should end up without having to pay any tax or very little depending on your other income. Why pay an agent. Do it yourself. Advertise locally, get a short term rental form from a stationers or pay a solicitor a one off fee to do it for you. If you live in Blackpool what about making it a holiday home, you will get better income and you can then use it for the times you might want to go back. You would need to employ someone to do changeovers etc but worth thinking about. As for capital gains tax if you want to sell it. Move back for six months then it becomes your principal home again.

leighbloke

If you have a mortgage (as it seems you do) check with them as it is likely that renting out the whole property is outwith the conditions you agreed to when taking it out - if they agree to a change in conditions they will often impose restrictions which may include using an approved agent, and want to see any rental agreement you intend to use.

But to your original question, you will have no tax to pay anywhere on the rental as your costs will exceed the income therefore no profit to tax.

Hillybilly

You are "allowed" 36 months cgt exemption if your home that was previously your principal residence has been rented out but is then sold.
You need to register with IR as a non resident landlord (this will only be allowed if all your tax affairs are up to date and you owe the IR nothing). Then you can receive rental income gross. Otherwise your tenant (or letting agent) has to deduct tax at source, pay it to the IR and you have to reclaim a refund. You are still obliged to submit a self assessment annual tax return. If, as is likely, you have no tax to pay year on year, the IR (as they did with me) will likely eventually write to you saying not to bother making an annual return any longer. I felt like framing that letter!

Mitzyboy

But they will be Spanish domiciled wont they, so they will pay all their tax in Spain unless I've misunderstood whats been said on here in the past, and my gestor

Hillybilly

Tax domicile and residency are 2 different things and are complex.
There is a good explanation here
http://www.taxationweb.co.uk/guides/...d_domicile.php
UK rental income is always taxed in the UK.