New to Renting out my property - Some tax questions

[mucker973]

Hi All,
I have a property I used to manage myself. The tenant paid me directly and I never declared it with the taxman. Going forward I have decided to use a letting agent to manage all of this. I currently reside abroad and when filling in the forms there is question which essentially is asking me to confirm that a) I authorise the letting agent to deduct tax on my behalf or b) I have filled in a form MRL1 which makes me exempt from tax deductions at the source.

My questions are around how much I will get taxed. I read the base is 20%. Is this based on income and if I were to earn above a certain threshold (like normal income with a job) does the tax percent increase or is it always just a flat 20%?

The other part to this here is that I live abroad now, so this is my only income in the UK, and it goes into a UK bank account. If I recall correctly, you don’t get taxed for the first (roughly) 12k of earnings. If we count only my UK income from the house here it would only be 6k so would that mean I don’t get taxed? I highly doubt I would be so lucky here; governments always find a way to squeeze more money out of you and probably factor in what I earn in Australia too even though it has nothing to with the UK! 😉

Thanks in advance

[Covent Garden Girl]

Your questions are more complicated than you imagine.

1) Yes, firstly as a non resident landlord, the agent or indeed tenants have to deduct tax at source, or you have to send off a form, but also wait for HMRC to send confirmation that they think it is okay for you not to have the tax deducted at source - that's usually because they trust that you will actually file your non resident income tax return and pay your taxes
https://www.gov.uk/hmrc-internal-man...manual/pim4810

2) the question of whether or not you are entitled to the personal allowance isn't simple, because firstly you need to be entitled to one. Read here https://www.gov.uk/hmrc-internal-man...sis/rdrm10340; then secondly, even if you are in theory entitled to one, you cannot claim it if you have excluded or disregarded income which you do not want taken into account on your return (basically other savings and investment income). https://www.gov.uk/government/public...nt-income-2022.

3) if you are resident in Australia, you are going to pay tax in Australia too on your UK source rental income, as they have a worldwide basis of taxation, so it might be a moot point whether you get the UK personal allowance or not, as you're probably already using your Australian personal allowance on your employment income

4) remember that as a non UK resident, you cannot file your tax return online, but you need to send a paper return in the post, and you need to complete the non resident papers too, including this form https://assets.publishing.service.go...sa109-2022.pdf.

It might be worth getting an accountant to do it for you, although with only £6k of rental income, you're going to waste at least £500-1000 of that on an accountant in the UK, and you'll have to make a double tax relief claim in your Australian income tax return.

[jpkeates]

I don't know what the situation is with Australian tax on UK rented property, and you'd probably better enquire locally.

There are two different things to address.
If you've been receiving income and not declaring it, you need to own up and pay what you owe - which sounds like nothing (see below), but you are liable for penalties for not declaring the income when you should have done.

Setting that aside, as a non-resident landlord, you are obliged to register with HMRC who will determine whether you can simply make an annual tax return and pay tax that way, or whether your tenant (or agent) should deduct tax at the basic rate before sending the money to you and then allowing you to sort out what you actually owe every year with a tax return. If the latter is used, whoever sends you the rent has to make a report to HMRC twice a year to confirm what's been collected.

The income is basically added to your other UK income and taxed accordingly, so it works the same.
From the sound of it, your income would be under the annual threshold for tax and there's nothing to pay anyway.

The previous non-reporting issue may influence HMRC's approach to the ongoing reporting.

[mucker973]

Thanks JPkeates, I knew you'd know!

I've been thinking of reporting it for a while. If I declare these past "earnings" do you think I'll just have to pay the tax (if there is any) or do you think there will be any penalties? Penalties are usually applied when you are caught out right? I've been abroard for 10 years now but the UK income was always just rent so based on the above I shouldn't owe any tax.

thanks

[jpkeates]

https://www.gov.uk/government/public...g-a-disclosure

There's a "not quite an amnesty" operating at the moment.

[Gordon999]

If you are living overseas, you must register as a non-resident landlord using NRL1 form to Tax Office if you receive rental income from a UK property. If you don't register , the letting agent is required to deduct 25% tax on any rental money paid to you.

After being registered as non-resident , the tax office will send a tax return to your overseas address every year and require you to submit a return before end of Oct for reporting "income arising in UK " only.

Former UK landlords, now living overseas can claim the annual personal allowance approx £12K , so you should not have any tax to pay on rental profit below £12K .

[DoricPixie]

Your tax situation in Australian depends on whether you’re a permanent resident/citizen or a temporary resident. If you’re a temporary resident you find yourself in tax sweet spot where HMRC doesn’t care about your Australian income and assets and the ATO doesn’t care about your UK income and assets. If you’re a permanent resident/citizen then the ATO will be interested in your UK rental income and assets.

[Another Fine Mess]

I was living In France and renting out property in the UK. Although there is a Dual Taxation System, France "has" to have it first.
So I did not pay UK taxes on the UK income.