Tax Planning on Property for
UK Residents and Non-UK Residents.
The end of March or more specifically
the 5th April remains a key tax planning date for UK residents.
However, it is also an important time for non-residents who may
have rental income from a UK property, because it is the cut-off
date to calculate property income profits or losses, explains
Peter Mason, from West Midlands Chartered Accountants, Armstrong
It is commonplace for ex-pats to
retain property in the UK, which is let for periods of overseas
absence. This ensures that the ex-pat has a place to live in the
UK should he/she return and also gives protection against a rise
in house prices during the period of absence.
Rental income arising from UK property
is chargeable to UK tax for individuals at lower (10%), basic
(22%) or higher (40%) rates.
Where a landlord is non-resident
basic rate tax must be deducted at source by the landlord’s
agent or by the tenants themselves and the tax passed over to
the Inland Revenue, on a quarterly basis. The agent must give
the non-resident landlord an annual statement showing details
of the tax deducted.
Under the Non Resident Landlords’
Scheme it is possible to apply to have all rents received gross,
provided that the landlord:
1) Has his/her tax affairs up to
2) Has never had any UK tax obligation.
3) Does not expect to be liable to UK tax.
4) Undertakes to comply with UK tax obligations.
Once this approval is obtained then
the landlord can continue to receive rents gross but must complete
the necessary annual Self-Assessment Tax Returns.
The annual tax return is often completed
by the landlords UK tax agent or accountant who works closely
with the letting agent. A rental income statement is prepared
showing the rentals received with deductions for associated expenses,
which are considered to be wholly and exclusively incurred. These
expenses include agent’s commission, rates, insurance, advertising,
repairs, cleaning, loan interests etc. Expenditure of a capital
nature such as furniture, fridge’s, washing machine etc,
is deducted by means of capital allowances or in the case of furnished
lettings, by a concessionary ware (wear?) and tear allowance.
A further “personal allowance”
deduction is usually available to the non-resident landlord (or
a double allowance in the case of a joint landlord such as man
Where tax has already been
deducted at source but no rental statement formally prepared,
then it is possible to claim back 6 years and this may result
in a significant tax refund.