A non-resident individual is liable to UK income tax on rental profits arising from a property in the UK. One should registration under the Non-Resident Landlords Scheme.
HMRC then requires the letting agent to deduct basic rate tax, which is currently 20%, on the amount of rent received less any allowable expenses paid by the letting agent or tenant. If there is no letting agent and the tenant pays £100 or more per week for rent , the tenant has to deduct the tax as directed. Any expenses deductible from the rent have to be revenue in nature and wholly and exclusively incurred for the rental business, for example advertising costs of attracting new tenants, ground rent, insurance on buildings and contents and provision of services .
The letting agent or tenant is required to account for the income tax deducted every quarter to HMRC. They should also complete an annual information form and provide the non-resident landlord with a tax deduction certificate.
Any expenses incurred by the landlord personally are not taken into account by the letting agent or tenant. When additional expenses are factored in on the tax return, including mortgage interest the landlord who is a basic rate taxpayer may have to reclaim some tax back. If the landlord is a higher rate or additional rate taxpayer then additional tax may become due.
Under the non-resident landlord scheme it is, however, possible to apply to HMRC to receive the rental income gross. If HMRC agrees to gross payment , HMRC advises the letting agent or tenant not to deduct tax from any rental payments and tax is paid via Self Assessment. An application can be made provided the landlord’s UK Tax affairs are up-to-date, or he has never had any UK tax obligations or he does not expect to be liable to UK tax.
Non-resident landlord should ensure that their tax affairs are up-to-date and tax returns are not late to retain gross payment status.
UK rental income is not part of any double tax treaty arrangement. Tax is due in the jurisdiction where the land is situated.
When selling the UK residential property HMRC has to be notified within 30 days. Following the March 2015 rebasing capital gains tax will be due on any gain.
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