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Renting out house in UK to pay for rental in the USA

Renting out house in UK to pay for rental in the USA

Old Feb 18th 2018, 11:55 am
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Default Renting out house in UK to pay for rental in the USA

Hi,

We are looking into relocating to Austin, TX.

We have a house in London which we have a mortgage on which we are looking to rent out in order to fund a rental in Austin.

Myself and my wife own the house in London. I have had a local Estate Agent out to give an idea on how much the house would rent out for. He has suggested the house will rent out for £2000 per month. This is approx $2800.

My question is will this money be taxed in the UK and/or taxed when the money is moved over to the USA to pay for the rental ?

Both myself and my wife will have a personal allowance of £11,500 each in the uk. £23,000 total per year. The yearly rental will generate £24,000 per year.

Am I right that I would not have to pay tax on this income in the UK ?

Thanks for all your help...

Richard
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Old Feb 18th 2018, 12:03 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Welcome to BE. Not to take away from your specific question, but I am sure the first thing we all will be asking is what visa you will be using to move to the USA.

Since you say the UK rental will fund the US rental, and you say you both have an allowance (I'm not sure what that is) in the UK, it does not sound like a work visa because you make no mention of income to be earned in the USA.

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Old Feb 18th 2018, 12:18 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Hi,

I am looking at moving to the USA on an E2 Visa. Starting up a business in Austin. Myself, My Wife, and 3 kids will be moving also...

Thanks,
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Old Feb 18th 2018, 1:20 pm
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Default Re: Renting out house in UK to pay for rental in the USA

An E2 visa requires evidence of substantial investment and needs to be more than a marginal business. If you're relying on renting out your home in the U.K. to keep a roof over your heads here it doesn't sound like the business is "not marginal" if it doesn't generate enough to even house you. I know nothing about Austin but in many cities $2800 a month would not get you a house large enough to house a family of 5 comfortably.

Also, being overseas with tenants back in the U.K. can be a nightmare. Years ago in London my first husband and I rented a flat from a couple who had moved to Spain and were renting out the flat to fund their place in Spain whilst they set up a business there. So a similar situation. The boiler broke down one winter and it was a hassle getting hold of them to let them know and arrange for repairs. We had to make costly international phone calls and we didn't have much of a time difference to consider (so your situation will get more difficult). In the end, we ended up paying for it ourselves and sending the bill to them. Most tenants wouldn't want to do this or even be able to do this. Unfortunately for us, their Spain dream fell flat and the business they started failed and they returned to England and wanted their flat back and we had to leave. You could find yourselves in the same situation - if your business fails, as an E-2 visa holder you will have to leave the country almost immediately. What then for your tenants?
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Old Feb 18th 2018, 1:33 pm
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Default Re: Renting out house in UK to pay for rental in the USA

You'll presumably have an agent to manage it for you, and should expect some repairs and maintenance costs, and there will be periods between tenancy especially from time to time. Personally I wouldn't predict more than about $20,000 of reliable income each year.

Once you move to the US on an E-2 visa you will be liable for US taxes on your worldwide income. It is unlikely that US taxes will be much on your rental income in the UK, but you will have to include it in your US tax return. Rental income has fairly generous deductions in the US - including mortgage interest, depreciation on the building (but not the value of the land), at 2.5% of the cost of the building per year, management fees, repairs and maintainance, advertising, and maybe a few other things.

Take a look at zillow.com for rentals in Austin to give you an idea of what you will get for your money. In most cities rentals are highly variable, because, just like in the UK there are good and bad parts of town. If a rental looks too good to be true, there is probably a reason!

Last edited by Pulaski; Feb 18th 2018 at 1:36 pm.
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Old Feb 18th 2018, 2:14 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Originally Posted by richyje7727 View Post
My question is will this money be taxed in the UK and/or taxed when the money is moved over to the USA to pay for the rental ?
Both myself and my wife will have a personal allowance of £11,500 each in the uk. £23,000 total per year. The yearly rental will generate £24,000 per year.
Am I right that I would not have to pay tax on this income in the UK ?
Most likely, based on these numbers you will not have to pay any tax in the uk. Providing you are eligible for the uk personal tax allowance as a non-resident, then yes you won't have to pay any tax in the UK, because your rental income will be less than your personal allowance, this assumes no other uk income . Pulaski covered the USA tax situation above.
UK personal allowance is covered here - https://www.gov.uk/tax-uk-income-live-abroad/personal-allowance.
You will likely still need to complete a tax return in the uk, even if the end result is no tax to pay.
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Old Feb 18th 2018, 4:21 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Originally Posted by richyje7727 View Post
Hi,
Both myself and my wife will have a personal allowance of £11,500 each in the uk. £23,000 total per year. The yearly rental will generate £24,000 per year.

Am I right that I would not have to pay tax on this income in the UK ?
Richard
Ok - this could be a case of I don't know what I'm talking about but I'm hoping for a move stateside too and in a similar situation.

What I've been told by a tax consultant is that the EA managing your property in the UK will automatically withhold the the standard 20% tax from what they transfer to you.

You need to fill in an NRL1i
https://www.gov.uk/tax-uk-income-live-abroad/rent

so you get the gross rent in the UK. You'll still have to pay the tax in the US however and need to fill out a self assessment in the UK. But might be best to go though this with an accountant.
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Old Feb 18th 2018, 4:22 pm
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Default Re: Renting out house in UK to pay for rental in the USA

You will have to complete the Self Assessment forms for your rental income in the UK, even if you are not liable for any tax. You also need to ensure the mortgage company is ok to revert to a buy to let, or allow you to rent for a period on your existing mortgage (most will give you a year or two). Gte the mortgage sorted before you leave if you do want to switch to a Buy to Let - they are much more expensive to arrange once outside the UK.
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Old Feb 18th 2018, 5:52 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Originally Posted by robtuck View Post
you also need to ensure the mortgage company is ok to revert to a buy to let, or allow you to rent for a period on your existing mortgage (most will give you a year or two). Gte the mortgage sorted before you leave if you do want to switch to a Buy to Let - they are much more expensive to arrange once outside the UK.
I assumed the house is owned outright as he says the rental income will pay the rent in Austin. If it’s moryahed then the rental income will cover the mortgage and a little more - certainly not enough to house a family of 5.

All in all, it sounds like a very hard-to-mouth existence. What if no tenant is found or the tenants don’t pay or cancel? If they are banking on this income to pay their own rent it’s very risky.
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Old Feb 18th 2018, 5:55 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Originally Posted by Twinkle0927 View Post
.... If it’s moryahed .....
Isn't that a species of fish?
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Old Feb 18th 2018, 6:11 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Originally Posted by Twinkle0927 View Post
I assumed the house is owned outright as he says the rental income will pay the rent in Austin. If it’s moryahed then the rental income will cover the mortgage and a little more - certainly not enough to house a family of 5.

All in all, it sounds like a very hard-to-mouth existence. What if no tenant is found or the tenants don’t pay or cancel? If they are banking on this income to pay their own rent it’s very risky.
I read the bit that said he has a house with a mortgage. If I understand correctly they are seeking to cover their mortgage in the UK with rental income, maybe have some left over to help fud in the USA as well. They have the option of reverting t an interest only Buy To Let before they leave which would radically reduce the monthly payments, but would not be paying down the capital.
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Old Feb 18th 2018, 6:23 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Originally Posted by robtuck View Post
I read the bit that said he has a house with a mortgage. If I understand correctly they are seeking to cover their mortgage in the UK with rental income, maybe have some left over to help fud in the USA as well. They have the option of reverting t an interest only Buy To Let before they leave which would radically reduce the monthly payments, but would not be paying down the capital.
If that is true, then they are going to have a very hard time finding a home for a family of 5 in a good school district.
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Old Feb 18th 2018, 9:20 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Hi,

My mortgage is only £184 per month in the UK, so very low.

We have been out to Austin. We can get a great house in a great school district for $2500 per month.

Thanks for all your replies.
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Old Feb 18th 2018, 9:21 pm
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Default Re: Renting out house in UK to pay for rental in the USA

Originally Posted by richyje7727 View Post
Hi,

My mortgage is only £184 per month in the UK, so very low.

We have been out to Austin. We can get a great house in a great school district for $2500 per month.

Thanks for all your replies.
yes, you can.

good luck with it all.
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