Non-resident landlord must fill in a Self Assessment Tax return?

by Readers Question

19:56 PM, 5th January 2017
About 2 years ago

Non-resident landlord must fill in a Self Assessment Tax return?

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Non-resident landlord must fill in a Self Assessment Tax return?

I am planning to become a non-resident landlord in the UK but I am anxious to avoid filling in a UK tax return again.tax returns

A few years ago I left the UK and pay my income tax in the non-EU country that I now reside in. I do have cash savings in the UK but the low interest rates currently on offer in the UK means my income from this is hardly noteworthy.

I have a stake in two properties in the UK. Both were bought with cash and never had a mortgage. One, a property a family member resides in and pays me interest and capital as if I was a mortgage provider. At the end of our agreement I will still have a 50% stake in the property and the family member also pays me ‘rent’ for the share I own. I am not on the deeds of the property but I do have a deed of trust detailing my share.

Soon this family member plans to move to a bigger property (circa. £500k) where I will inject further cash plus the sale of our current property (circa. £300k). The plan is that I retain a 50% share in this property and a similar agreement of rent/interest/capital repayment of the ‘loan’ will be made. Second, a property (circa £200k) a retired parent bought together equally with me but in that parent’s name. The property is rented out to a tenant. The said parent need not pay income tax as the amount earned in rent is below the personal allowance. We share costs/proceeds from rent equally. Again, this property is not in my name but I have a deed of trust stating my share.

I wish to use my cash savings to buy a property in the UK, possibly in conjunction with another parent (but who is in the 50% income tax bracket). This time I intend to be named on the deeds. I do not own any property outside of UK so this would be the my first property and would avoid paying additional stamp duty on the purchase. My intention is to rent out the property. I have read that if you are a non-resident landlord then you must fill in a self-assessment tax return. I wondered if this is absolutely correct? (for example, if you know your UK income is under the personal allowance, is it still necessary to complete the self-assessment form?).

My other concerns relate to the time I finally want my share in cash form from the other properties I have stakes in. If one day the family member needs to give me £250k+ back in cash or the parent return my £100k+, what is the best way to do this? Am I under any obligation to declare the returning of funds given to them to help them buy a property which they are now paying back to me?

Many Thanks

Michael.



Comments

Mark Alexander

20:08 PM, 5th January 2017
About 2 years ago

Hi Michael

You have choices.

Please see https://www.gov.uk/tax-uk-income-live-abroad/rent

With regards to calculating CGT for non-resident landlords please see >>> https://www.tax.service.gov.uk/calculate-your-capital-gains/non-resident/
.

Graham Bowcock

12:14 PM, 6th January 2017
About 2 years ago

Hi Michael

You will need to be in the non-resident landlord (NRL) scheme in order to make sure that your tenant or letting agent is able to pay you the rent gross. If you are not in the scheme then you they are legally obliged to make a deduction to cover tax and to account for HMRC. This is an occasion where you do really need an agent, and one who understands NRL. Tenants will not be very interested in deducting tax (and they will be liable if they get it wrong). Agents will also be wary about deducting tax so will normally go straight into the NRL scheme to save it getting messy. This will only apply on your share of rent (making it more complicated), assuming your co-owners are in the UK.

It sounds like you are already collecting rent so you will hopefully already be aware of this scheme.

Regards

Graham


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