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26 January 2022

Non-resident landlords

Non-resident landlords receiving income from UK property, are obliged to file tax returns annually to declare the rental income received, less any typically associated costs incurred in generating the income. Basic rate tax relief is also available for any mortgage interest incurred.

Such income will need to be declared in the country where investors reside but any tax paid in the UK will be offset against any tax assessed in the other country where permitted by the Double Taxation Agreement between both countries.

The DTA may also permit entitlement to the annual tax free allowance, in which case investors will only be taxed on the net rental gain remaining after the tax free allowance has been taken in to account.

It should be noted that from 6 April 2024, HMRC are changing their tax reporting requirements to quarterly reports throughout the tax year, in a digital format, following the success of the VAT reporting changes made recently, and this will apply to landlords who are in receipt of rental proceeds in excess of £10,000 per annum.

When selling the UK property, each investor will be required to file a CGT return with HMRC within 60 days of the sale taking place to declare the gain and to pay any corresponding capital gains tax due. The chargeable gain will be assessed after taking typical buying and selling costs into account, including costs of a capital nature for home improvements and extensions. Where permitted, a tax free allowance for capital gains specifically will reduce the chargeable gain to be assessed for tax.

Hodgens Global can provide you with the support needed to identify and assist with all relevant tax compliance and reporting matters to be addressed