All rent received after deducting allowable expenses will be subject to UK tax whether you are resident in the UK or not, and must be reported on your self-assessment return. However with careful planning and good advice it is possible to minimise your tax liabilities.
Allowable expenses include:
- Tax Relief on Mortgage Interest
- Ground Rent and Maintenance charges, if leasehold
- Agency letting and management fees
- Repairs and maintenance but not the cost of improvements
- Legal and professional costs
- Marketing costs
- Travelling expenses
- Accountant fees
This list is continuously changing and you will need to contact HMRC for further guidance and advice.
Although the landlord may be outside the UK tax jurisdiction, income from UK property rental is liable to tax in the UK. HMRC can require an agent to deduct income tax from rents received and account to HMRC for it. Non-Resident Landlords can apply to HMRC to receive their rental income without deductions, they will in turn release the agent from deducting income tax.
CAPITAL GAINS TAX (CGT)
Homeowners do not incur CGT on their principal private residence when it is sold as currently there is relief from CGT.
A property that has been purchased for the purpose of renting will, when sold, be subject to CGT. There is an annual allowance but it is advisable to contact HMRC for further guidance and advice.