Tax and Renting UK House
Sep 29th 2012, 5:53 pm
#1
Just Joined
Thread Starter
Joined: Sep 2012
Posts: 5
Tax and Renting UK House
Hi,
First, I am a newbie so hi to all.
I may be transfering with work to the US early in 2012.
Rather than sell up I am considering keeping our house on here and renting it out.
Has anyone else done this? How did it work out?
Am also curious about tax, as I guess I'd be paying US income tax but not sure whether I'd be paying US or UK (or both) on the rental income, how deductables (interest and expenses, etc) are calculated etc.
Many thanks in advance.
First, I am a newbie so hi to all.
I may be transfering with work to the US early in 2012.
Rather than sell up I am considering keeping our house on here and renting it out.
Has anyone else done this? How did it work out?
Am also curious about tax, as I guess I'd be paying US income tax but not sure whether I'd be paying US or UK (or both) on the rental income, how deductables (interest and expenses, etc) are calculated etc.
Many thanks in advance.
Sep 29th 2012, 6:36 pm
#2
Expat Warrior
Joined: Mar 2012
Posts: 5
Re: Tax and Renting UK House
Did this between 1993 and 2000.
It worked out OK but you need reliable renters and a good agent. Be aware that houses that in the rental market will probably need attention before selling.
One trap I've seen some get into is that, if you move to the US with a UK rental and then decide to sell it, you can be caught by US tax. To avoid tax on the sale of your primary property in the US, you must have been living it in for 3 of the last 5 years.
Once in the US your should be able to avoid all UK tax or offset it as foreign tax paid on your US tax return. On your US return you will want to put you house "into service" and then you can deduct mortgage interest and upkeep from your rental income.
It worked out OK but you need reliable renters and a good agent. Be aware that houses that in the rental market will probably need attention before selling.
One trap I've seen some get into is that, if you move to the US with a UK rental and then decide to sell it, you can be caught by US tax. To avoid tax on the sale of your primary property in the US, you must have been living it in for 3 of the last 5 years.
Once in the US your should be able to avoid all UK tax or offset it as foreign tax paid on your US tax return. On your US return you will want to put you house "into service" and then you can deduct mortgage interest and upkeep from your rental income.
Last edited by ribenapete; Sep 29th 2012 at 6:37 pm. Reason: typos
Sep 29th 2012, 8:59 pm
#3
Rootbeeraholic
Joined: Aug 2009
Location: Houston, Tx
Posts: 2,280
Re: Tax and Renting UK House
I did this. I just included it on my US tax return. No UK tax was due on it.
I sold just before 2 years in the US so that I didn't get taxed on it as at that point I'd still lived in it 3 out of the last 5 years.
Interesting to note that when you sell it and include it in your US tax return they just want to know the price you bought it for in US$ and the price you sold it for in US$. This means if you we're to pay any tax on it, it would be susceptible to currency xrate fluctuations. I made a paper loss in US$ due to large xrate differences between buying and selling but made a profit in GBP. I didn't owe anything on it anyway just thought it was interesting.
I sold just before 2 years in the US so that I didn't get taxed on it as at that point I'd still lived in it 3 out of the last 5 years.
Interesting to note that when you sell it and include it in your US tax return they just want to know the price you bought it for in US$ and the price you sold it for in US$. This means if you we're to pay any tax on it, it would be susceptible to currency xrate fluctuations. I made a paper loss in US$ due to large xrate differences between buying and selling but made a profit in GBP. I didn't owe anything on it anyway just thought it was interesting.
Sep 30th 2012, 12:14 am
#4
BE Forum Addict
Joined: Aug 2004
Posts: 4,754
Re: Tax and Renting UK House
You just enter the rent on your US taxes, take the appropriate deductions and tax credits for any UK tax paid. Turbotax will step you through it.
On the UK side you should apply to the non-resident landlord scheme to see if your rent can be paid to you free of UK tax.....If you do have to pay tax you'll probably have to do a UK self assessment, but you'll be able to take a credit for the UK tax on your US taxes.
http://www.hmrc.gov.uk/international/nr-landlords.htm
Don't forget to file a P85
Your bigger US tax complications will appear if you have any UK pensions (particularly SIPPs), ISAs, or insurance policies with investment components.
Also investigate how your employer will be dealing with social security taxes. Will they continue to pay NIC for you while you are in the US? or will you be paying FICA taxes?
On the UK side you should apply to the non-resident landlord scheme to see if your rent can be paid to you free of UK tax.....If you do have to pay tax you'll probably have to do a UK self assessment, but you'll be able to take a credit for the UK tax on your US taxes.
http://www.hmrc.gov.uk/international/nr-landlords.htm
Don't forget to file a P85
Your bigger US tax complications will appear if you have any UK pensions (particularly SIPPs), ISAs, or insurance policies with investment components.
Also investigate how your employer will be dealing with social security taxes. Will they continue to pay NIC for you while you are in the US? or will you be paying FICA taxes?
