Tax reporting for UK rental property
 

I have a terrace house that I now rent out in the UK. Can anyone advise me as to whether the property should have a land value that would need to be deducted to find the base amount to depreciate on? It seems to me that in the UK the value of the land is not disclosed as it is here in the US. Thanks for any help.

Re: Tax reporting for UK rental property
 

Our accountant had us estimate the land and house value. We just went for a general rebuild value if it burnt down and put the rest as land value.
Dont understand the purpose of it - although it may become clearer years down the line lol

Re: Tax reporting for UK rental property
 

My accountant went with 80% house, 20% land split. This was all based on the exchange rate at the time of purchase.

The reason behind it all is that you can depreciate the house, but the land component doesn't lose value (it will always exist), so you can't depreciate that

Re: Tax reporting for UK rental property
 

Annual depreciation is based on 1/26th of the value of the home (excluding land) so that amount plus interest and rental expenses can be written off against rental income. However, depreciation must be recovered at a maximum 25% capital gains rate when the house is sold to determine taxes owed.

Re: Tax reporting for UK rental property
 

Same here, 80/20.

Does make me wonder though, as our property has increased in value since we bought it...

Re: Tax reporting for UK rental property
 

Let me give you some advice that I wish I'd had when we moved to the US and rented our house in the UK;

If you are renting and then decide to sell the house, and you have not lived in the house for 2 of the last 5 years, you will be subject to capitol gains tax in the US.

This can be pretty costly if you make a sizeable profit on the house. You cannot do a 1031 exchange as any foreign property is not a 'like kind' so there is no way around it even if you do invest the funds into a US house as we did.

Re: Tax reporting for UK rental property
 

Thanks for the Capital gains tax advise. It is really just something to fall back on just in case our move over here didn't work out. It looks like we won't be making any gains on it in the current market as we will probably try & sell it soon.