Go Back  British Expats > Living & Moving Abroad > USA
Reload this Page >

Brit expat buying property in UK

Brit expat buying property in UK

Old May 17th 2006, 4:23 pm
  #1  
Just Joined
Thread Starter
 
Joined: May 2006
Posts: 3
uk_river is an unknown quantity at this point
Default Brit expat buying property in UK

Hi everyone,

I am a British citizen living in the USA. I am in the process of buying a house in the UK, but will remain a resident of the USA. I am planning to rent out this house in the UK using a property management company.

So this all brings up taxation questions. I would appreciate any responses from people in a similar situation. Do you get US tax relief on your mortgage? Is it possible to get US tax relief on the British stamp duty paid? Do you pay US taxes on your UK rental income?

Thank you,
River
uk_river is offline  
Old May 17th 2006, 4:51 pm
  #2  
Lost in BE Cyberspace
 
Joined: Oct 2003
Posts: 22,105
AmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond reputeAmerLisa has a reputation beyond repute
Default Re: Brit expat buying property in UK

Let an accountant be your guide. I would anyway.
AmerLisa is offline  
Old May 17th 2006, 5:03 pm
  #3  
Forum Regular
 
Joined: Jun 2004
Location: Hoboken, NJ
Posts: 54
THFC1 will become famous soon enoughTHFC1 will become famous soon enough
Default Re: Brit expat buying property in UK

I have an apartment in the UK that I rent out and you can claim against the cost of the mortgage, any repairs etc that you have done and the fees the management company takes. This is offset against the rent you receive as income. I end up pretty much even.

No idea about the Stamp Duty as I had it before I came out here.
THFC1 is offline  
Old May 17th 2006, 6:41 pm
  #4  
The Duchess of Putney
 
Joined: Jan 2005
Location: HOME
Posts: 23,151
Elvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond reputeElvira has a reputation beyond repute
Default Re: Brit expat buying property in UK

Originally Posted by THFC1
I have an apartment in the UK that I rent out and you can claim against the cost of the mortgage, any repairs etc that you have done and the fees the management company takes. This is offset against the rent you receive as income. I end up pretty much even.

No idea about the Stamp Duty as I had it before I came out here.

Eh - but aren't you supposed to file and pay taxes on the rental income in the UK, and THEN declare it and get a tax credit for it from the IRS in the US?
Elvira is offline  
Old May 17th 2006, 6:55 pm
  #5  
Forum Regular
 
Joined: Jun 2004
Location: Hoboken, NJ
Posts: 54
THFC1 will become famous soon enoughTHFC1 will become famous soon enough
Default Re: Brit expat buying property in UK

Originally Posted by Elvira
Eh - but aren't you supposed to file and pay taxes on the rental income in the UK, and THEN declare it and get a tax credit for it from the IRS in the US?
I'm not sure exactly how it works but I don't have to pay any tax on it in the UK. The value of the rent I receive is slightly less than I pay out in mortgage and fees. I just give the info to PWC each year who file the taxes in the UK and US.

If you are buying a property in the UK you should file for Non Resident Landlord status with the Inland Revenue which allows you to collect the rent without tax deducted.
THFC1 is offline  
Old May 18th 2006, 9:38 am
  #6  
Just Joined
Thread Starter
 
Joined: May 2006
Posts: 3
uk_river is an unknown quantity at this point
Default Re: Brit expat buying property in UK

Thank you all for your replies.

THFC1 - that really helps. So you're using a professional outfit to deal with tax. My next questions would be:

- How do I inform the IRS that have a rental income - do I have submit evidence, or is the Inland Revenue involved?

- What evidence do you need to claim a tax rebate on a UK mortgage?

Thanks,
River
uk_river is offline  
Old May 18th 2006, 11:13 am
  #7  
Pass me the Marmite..
 
franc11s's Avatar
 
Joined: Feb 2004
Location: Atlanta, GA.
Posts: 864
franc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond reputefranc11s has a reputation beyond repute
Default Re: Brit expat buying property in UK

Originally Posted by uk_river
Thank you all for your replies.

THFC1 - that really helps. So you're using a professional outfit to deal with tax. My next questions would be:

- How do I inform the IRS that have a rental income - do I have submit evidence, or is the Inland Revenue involved?

- What evidence do you need to claim a tax rebate on a UK mortgage?

Thanks,
River
You don't need evidence (but they will throw you in Jail if they ever do an audit).

You do your taxes as normal, treat it like any US income / expense / mortgage. The IRS doesn't care because they tax you the same on WORLD-WIDE income once you reside here. Forever ONCE you become a CITIZEN.

So, when you do your taxes / use an accountant just put the UK address and use a fair currency (average for the year) conversion.

BTW - When you sell the HOUSE in the UK and make a profit - YOU CAN BE TAXED ON THE PROFIT !!!!
franc11s is offline  
Old May 18th 2006, 1:40 pm
  #8  
.
 
Yorkieabroad's Avatar
 
Joined: Nov 2002
Location: Where bad things rarely happen in movies
Posts: 8,933
Yorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond reputeYorkieabroad has a reputation beyond repute
Default Re: Brit expat buying property in UK

Originally Posted by THFC1
I'm not sure exactly how it works but I don't have to pay any tax on it in the UK. The value of the rent I receive is slightly less than I pay out in mortgage and fees.

You've answered your own question there.....if you don't make a profit, you won't pay tax If you make a profit over your personal allowance, after you have taken all the deducitons you can, then you are liable to UK tax on the rental income (as you say, you can apply to have the rental paid without deduction for UK tax) .

From a US tax point of view, you need to declare the income on your annual return, and claim the offset of any UK tax you have already paid.

Sorry - no idea about the stamp duty side - we've not bought anything above the threshold since we've been here. We just bought new in the US, and itemised all our purchase costs here, so presumably you would be able to do the same there? Don't know - one to check with a professional - or call the IRS and ask - they're actually surprisingly friendly and helpful! Really!!
Yorkieabroad is offline  
Old May 18th 2006, 5:28 pm
  #9  
Peter21
Guest
 
Posts: n/a
Default Re: Brit expat buying property in UK

We are US residents (and dual US/UK citizens) and have had a rental house in UK now for nearly 20 years (!). It works out really well. Here are some thoughts on the process that echo some of the other comments:
1. As indicated in the responses, you need to contact the Inland Revenue in UK to get them to OK rents being transmitted to you without deduction of UK income tax. We use an agent in UK and without this a large amount is deducted before being transmitted. You can claim this back later but there is a large time lag. You will probably have to fill out a UK income tax return (a lot easier than US forms!) with estimated rental income and all the deductions you can come up with. Hint: mortgage interest is deductible, so you will almost certainly come up with a loss on paper. We filled out a UK income tax form for a few years until they wrote to us telling us we did not need to any more.
2. You can fill out the US income taxes as usual, with Schedule E added for the rental property. The US authorities are a bit more generous than the UK with deductions, particularly for depreciation, and don’t forget stamp duty, legal costs, travel, phones, mail etc. You can claim up to $25,000 in deductions from your regular income (more if you can claim to be a “Real-Estate Professional”) with some limits for big earners. This is a huge benefit -- thank you to US real estate industry.
3. We use Turbo Tax and have found it pretty easy. The advantage of doing US taxes yourself is that you learn a lot amount the US tax rules and this has saved us a ton of cash over the years. Turbo Tax also allows you to do what-if calculations. Any time you spend understanding US taxes will be time well spent.
4. We rented directly for 10 years or so from US until it became too much of a drag. We have used an agent for the last 10 years and although it makes things easy, it costs us a lot in simple maintenance – a simple job sees to always cost over GBP100. If you have a trusted relative or friend who could do this, then this will save you a lot. We had a problem tenant a couple of years ago and it cost thousands to clean our house and repair the damage. The agent should have been keeping a better eye on the house.
5. We really have kept the house as an insurance in case we would want to go back to UK and house prices went through the roof. It has saved us a lot in US taxes and the house has gone up nicely, though after 10 years in 1996 it was back to its purchase price. The house has hardly been empty. I understand that this can be a problem for some rental houses. Also another problem is the use of variable rate mortgages in UK – we had a terrific spike in costs in the early 1990s due to mortgage rates increasing. We now use fixed rate mortgages just out of fear of another spike.


Originally Posted by uk_river
Hi everyone,

I am a British citizen living in the USA. I am in the process of buying a house in the UK, but will remain a resident of the USA. I am planning to rent out this house in the UK using a property management company.

So this all brings up taxation questions. I would appreciate any responses from people in a similar situation. Do you get US tax relief on your mortgage? Is it possible to get US tax relief on the British stamp duty paid? Do you pay US taxes on your UK rental income?

Thank you,
River
 
Old May 18th 2006, 5:42 pm
  #10  
Peter21
Guest
 
Posts: n/a
Default Re: Brit expat buying property in UK

I should also have mentioned (as indicated by a couple of the posts) that

UK taxes on UK sourced income and expenses only. When you complete the UK tax forms you need only include UK rental income and expenses and any other UK income.

USA taxes on worldwide income and expenses so you need to include UK property. Usually this will be a loss, with deductions for taxes, interest and depreciation, so the UK house can have the nice effect of reducing your US taxes.


Good luck!



Originally Posted by Peter21
We are US residents (and dual US/UK citizens) and have had a rental house in UK now for nearly 20 years (!). It works out really well. Here are some thoughts on the process that echo some of the other comments:
1. As indicated in the responses, you need to contact the Inland Revenue in UK to get them to OK rents being transmitted to you without deduction of UK income tax. We use an agent in UK and without this a large amount is deducted before being transmitted. You can claim this back later but there is a large time lag. You will probably have to fill out a UK income tax return (a lot easier than US forms!) with estimated rental income and all the deductions you can come up with. Hint: mortgage interest is deductible, so you will almost certainly come up with a loss on paper. We filled out a UK income tax form for a few years until they wrote to us telling us we did not need to any more.
2. You can fill out the US income taxes as usual, with Schedule E added for the rental property. The US authorities are a bit more generous than the UK with deductions, particularly for depreciation, and don’t forget stamp duty, legal costs, travel, phones, mail etc. You can claim up to $25,000 in deductions from your regular income (more if you can claim to be a “Real-Estate Professional”) with some limits for big earners. This is a huge benefit -- thank you to US real estate industry.
3. We use Turbo Tax and have found it pretty easy. The advantage of doing US taxes yourself is that you learn a lot amount the US tax rules and this has saved us a ton of cash over the years. Turbo Tax also allows you to do what-if calculations. Any time you spend understanding US taxes will be time well spent.
4. We rented directly for 10 years or so from US until it became too much of a drag. We have used an agent for the last 10 years and although it makes things easy, it costs us a lot in simple maintenance – a simple job sees to always cost over GBP100. If you have a trusted relative or friend who could do this, then this will save you a lot. We had a problem tenant a couple of years ago and it cost thousands to clean our house and repair the damage. The agent should have been keeping a better eye on the house.
5. We really have kept the house as an insurance in case we would want to go back to UK and house prices went through the roof. It has saved us a lot in US taxes and the house has gone up nicely, though after 10 years in 1996 it was back to its purchase price. The house has hardly been empty. I understand that this can be a problem for some rental houses. Also another problem is the use of variable rate mortgages in UK – we had a terrific spike in costs in the early 1990s due to mortgage rates increasing. We now use fixed rate mortgages just out of fear of another spike.
 

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.