If you’re an expatriate already or about to join the ever increasing ranks of Brits upping sticks and moving abroad to see if the grass really is greener, you may well be aware of the fact that with non-resident status in the UK comes the potential to save tax or at least enhance your financial status with careful fiscal planning. Non-resident status for taxation purposes is officially granted after you have filled in a P85 form stating that you are leaving the UK for a period of 12 months or more, submitted it to HMRC and had confirmation from them that they acknowledge your change in status.
All well and good – but did you know that even if you have non-resident status and are therefore not liable to UK income tax on income earned in your new nation of residence for example, you are still potentially liable to British tax on any income that you derive from the UK. So, if for example you have a UK home and you want to rent it out, you will be liable for tax on that rental income. But fear not because Degtev is here to tell you all about expat tax saving and your UK property.
Having a home in the UK whilst living abroad and doing nothing other than leaving the property empty for rising damp and mice to move in makes no sense at all. Especially in these tough financial times of ours when apparently there is a very strong rental market emerging in the UK. Many Brits who move abroad and cannot or prefer not to sell their home in the UK have the option and the right to rent it out and earn an income from it. This income may well cover outstanding mortgage payments, and having the home inhabited by ideally wonderful tenants will mean the property is well cared for in your absence!
Those with mortgages will have to inform their lender of their intention to let the property as well as all insurance companies who have issued policies relating to the property. Additional or alternative insurance arrangements will then need to be made. Those letting properties also have to have up to date certificates of safety on all gas and electrical appliances left in the property and many who move abroad and let their UK home prefer to do so through a good rental agency. A good agency will make it that much easier to manage, they will find and vet tenants, collect rents and be on hand for any issues arising regarding the maintenance of the property. However, they also have to act like a mini-taxman and collect taxation owed on rental income earned and pass it along to HMRC.
That’s because when you leave the UK, as previously stated, any income you earn in the UK is potentially liable to UK tax. That is, unless you apply for HMRC’s lovely Non-Resident Landlord Scheme! This is a scheme that you sign up for and if accepted, you can earn your rental income gross. You need to apply to join the scheme in good time and before you begin earning rental income ideally. If you have not joined or not been accepted in time and you’re already in receipt of rental income, your management agency will be obliged to be withholding tax. However, once you’re a fully signed up member, you can earn your rental income gross.
Every year you then have to complete a self-assessment tax return and include the rental income earned on the form. You then have to submit this form and pay any outstanding money owed within the deadlines otherwise you will be kicked off the Non-Resident Landlord Scheme and risk losing potentially substantial tax savings. Deadlines are the 31st of October for postal submission of your form or 31st of January for online submission. To find out more about Her Majesty’s Revenue and Custom’s Non-Resident Landlord Scheme, full details can be found by clicking here.