On the 9 July, David Rickwood Personal Tax Director for Shaw Gibbs posted the top 10 tax considerations residential landlords need to take into account.

Following is my answer to David’s second point - If you are a non-UK resident landlord, are you aware of the non-resident tax rules? 

If your property is situated in the UK all rental income must be declared annually on your UK self-assessment income tax return. Unless you are registered under the non-resident landlord scheme, 20% tax must be withheld at source (by either your letting agent or the tenant if no letting agent used) from the rents received and this is paid over to HMRC. A credit will be given against the final tax liability for any non-resident landlord tax deducted at source. If the tax deducted exceeds the tax due any excess will be repaid.

The gross rents are included on the tax return however, you are able to claim relief for most expenses incurred. These include but are not limited to insurance, repairs and maintenance costs, replacement furnishings (initial costs are never allowable), service charges and ground rent, letting agent fees, accountancy fees etc. Following recent changes to tax legislation mortgage interest is no longer offset against the rental income but is instead given as a tax deduction where applicable.

If the property is owned jointly, each owner must complete their own self-assessment income tax return and declare their portion of the rental income and expenses. The self assessment tax return must be filed by 31 January following the end of the tax year. The 2018/19 return must be filed by 31 January 2020 (or 31 October 2019 if a paper return is filed)

What if I decide to sell my UK property?

With effect from 6 April 2015, non-UK resident property owners must report disposals (including gifts) of UK residential property to HM Revenue and Customs (HMRC) within 30 days from the date of the completion of the disposal and calculate any non-resident capital gains tax (NRCGT) due.

The report can be made online directly to HMRC and should include the name and address of the individual disposing of the property (joint owners much each report their share), the address of the property sold, the details of any tax agent assisting with the tax returns or the declaration and a calculation of any gain and tax due.

A report must be made in respect of all disposals whether a gain or loss has been realised and regardless of whether any tax is payable.

If a self-assessment tax return is completed annually, the gain will also need to be declared on the tax return.

There are three methods of calculating the chargeable gain, i) straight line apportionment, calculated over the period of ownership and apportioned to the period from 6 April 2015, ii) No apportionment – effectively taxed on the whole period of ownership and iii) Default position where the taxpayer is treated as having acquired the property at 5 April 2015 for is open market value. The taxpayer can choose the most beneficial calculation for them.

When is the tax payable?

Income tax is payable on 31 January following the year of assessment. For the year ended 5 April 2019 the tax will be payable by 31 January 2020.

Capital gains tax is payable either within 30 days of the completion date, when the NRCGT return is filed or 31 January following the year of assessment if a self-assessment return is filed. From 2020 CGT will be payable within 30days of the disposal regardless of whether a tax return is filed.

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