British US Permanent Resident Owning Property in the United Kingdom
 

Hi fellow Brits,


I am sure there are a few of you British Citizens that are permanently residing in the USA but own 1 or more property in the United Kingdom and I was hoping you would be able to help shed some light for me on the tax implications of such a scenario.

My situation is that I will be moving to the USA as a permanent resident within the next few months and currently own a 1 bedroom property in the United Kingdom. I have lived in this property continuously for the last 5.5 years.

I do not see me purchasing a property in the USA in the short term for several reasons such as no credit history etc. Happy to rent until I become totally settled. However, I am tempted to purchase a 2nd property here in the United Kingdom right now as a Buy to Let before I move to the USA. This effectively would mean I would have 2 properties rented out. when i move to the USA. The thinking here is that if I return to the United Kingdom within the next 5 – 10 years (hopefully then as a US Citizen) I still have a go foothold on the UK property ladder.

I just wanted to know the tax implications of owning property in the UK whilst residing in the USA? Also when selling property are you subject to paying capital gains tax to both the US and UK taxman?

Any advice around this would be greatly appreciated.
Cheers

Re: British US Permanent Resident Owning Property in the United Kingdom
 

There's a quite a lot of information on this under a question from 6 days ago- "Moving to USA – List of things to do". It's near the bottom of the page.

Re: British US Permanent Resident Owning Property in the United Kingdom
 

Capital gains is going to really hurt, that and any gains on the exchange rate.

As mentioned though, there's quite a few threads, one within a week that covers quite a lot of this a bit further down.

Re: British US Permanent Resident Owning Property in the United Kingdom
 

Do some research on 1031 exchanges before you buy another property. There are many title companies that will talk to you for free.

But just think about what would happen if the pound fell to $1=£1 would it still work. Could you afford to maintain the property? How would you remortgage in 5 years?

It is possible to buy a house in the US after moving here in quite a short period of time. Mortgage companies look at more than just credit scores.

Re: British US Permanent Resident Owning Property in the United Kingdom
 

As a US tax resident you will have to pay US tax on any rental income and will be able to take the usual deductions fro expenses and depreciation. You will also be liable to UK tax on the rental income as it is originates in the UK, but you can get a tax credit for any US tax that you have paid.

I would also comment that you should understand the full consequences of becoming a US citizen if you plan on ever returning to the UK as your taxes and financial life will be very restricted and complicated as a US expat.

Re: British US Permanent Resident Owning Property in the United Kingdom
 

Well actually becoming an LPR is more of a mess than being a US citizen because as an LPR your tax home has to be in the US. Unless you give up LPR status of course.

Anyway you're subject to UK capital gains tax on properties you own that aren't your principal residence, there's an 18-month grace period if it was originally your principal residence but that doesn't sound relevant. UK CGT is 28% which is way higher than the US long-term CGT rate, so basically you would claim a foreign tax credit on 1116 if you ever sold it and there is no US tax, just the UK tax.

Rental income has to be declared as income on your US tax return.

Re: British US Permanent Resident Owning Property in the United Kingdom
 

We've lived in the US for 14+ years and purchased a property in the UK about 8 years ago when the market crashed. We've had it rented with a full-service property manager (part of one of the big Estate Agent chains) and it's worked just fine. We have the rent paid gross as we are not UK Tax payers (also have my UK pension paid gross as well). You would still be required to complete a UK tax return each year - and if any tax is due you can deduct the payment from your US tax return. You would treat the property as an overseas rental asset on your US tax (40 year depreciation rather than 27.5 for a US property), but otherwise you would deduct all your costs as any US rental property.