Depending when you leave the UK to live overseas you may be entitled to a refund of UK tax (assuming you have paid tax throughout the year – eg Pay As You Earn on a salary).
A refund arises because you are entitled to a UK personal allowance for the whole year, even if you have been resident in the UK for part of the tax year.
If you are not in the UK Self Assessment regime you should complete a form P85 and send this to HM Revenue and Customs in the UK with the P45 issued by your last employer in the UK.
The form P85 can be sent to HM Revenue after you have moved to Australia.
If you are already in the Self Assessment system you should not submit a form P85. Rather, you complete your Self Assessment tax return – including the Residence supplement – after the end of the tax year in which you have left the UK.
A tax repayment should then be issued to you after the tax return has been processed.
Note that a Self Assessment tax return including a Residence supplement cannot be submitted through the HM Revenue & Customs (.gov.uk) website. To lodge such a tax return electronically you must either buy suitable tax return software, or instruct a tax accountant to lodge your UK tax return – such as bdh Tax.
You should complete and submit a Non Resident Landlord form – a form NRL1 – with HM Revenue & Customs.
Once this form has been processed by HM Revenue you will be able to receive the rental income from your let property on a gross basis – ie without any deduction of tax being made by your managing agent (if you have appointed one) or your tenants (if you haven’t).
If you are not already in the UK Self Assessment system you can expect to be entered into the UK Self Assessment system and to be required to submit a UK tax return in future years.
bdh Tax will be pleased to assist with the preparation and e-lodgment of your UK tax returns.
If you are moving to live in Australia you can expect to be required to include the UK rental income (after allowable deductions – as computed under Australian tax law) on your Australian tax return. The rules for claiming tax deductions under Australian tax law are different to the UK rules, so we recommend you consider instructing an advisor that is familiar with the tax position in Australia – such as bdh Tax.
Note that this requirement to include UK let property income on an Australian tax return does not apply to those who are temporary visa holders and who can make use of the temporary tax resident exemptions, which are discussed below.
bdh Tax can also assist with your Australian tax returns.
In other words, bdh Tax can assist with the preparation and e-filing of your UK and your Australian tax returns.
Our fees are fixed in amount, and are quoted up front before you instruct us.
Unless you are a temporary tax resident of Australia (as defined – see below) once you are living in Australia as an Australian citizen or permanent visa holder your UK source pension income is wholly taxable in Australia under the provisions of the Tax Treaty between the two countries.
There is an HM Revenue form to be completed and stamped by the Australian Taxation Office as soon as possible following your arrival to live in Australia.
This form is sent to HM Revenue, and once processed a NT (No Tax) PAYE Coding should be issued to the administrators of your UK pension.
There may be a tax repayment to be claimed from HM Revenue if you delay the completion of the Tax Treaty form, or if it takes a few months to be processed by the Australian and UK tax authorities.
bdh Tax can assist with the completion of this form, and with the completion of your future Australian tax returns: the UK pension income should be included on Australian tax returns for future years, and will be subject to tax in Australia.
Income tax will be payable to the Australian Taxation Office after the first Australian tax return is lodged, and possibly on a quarterly basis under the Pay As You Go system thereafter, depending on the amount of tax payable to the ATO.
If you move to Australia and hold a temporary residency visa your UK pension income is likely to remain taxable in the UK, and not taxable in Australia.
Almost all individuals in Australia are required to complete and lodge a Tax Return if they are resident in Australia and are receiving an income.
Those who are not tax resident in Australia are also required to prepare and submit an Australian tax return if they are receiving income that remains taxable in Australia – eg net rental income from a let property.
Tax Returns are to be lodged with the Australian Taxation Office by 31st October following the end of the tax year, unless you appoint a Registered Tax Agent before that date.
Registered Tax Agents are permitted to submit tax returns for clients for several months beyond the 31st October deadline, often up to the middle of May following the end of the tax year.
bdh Tax is a firm of Registered Tax Agents, number 25691979.
Once you have arrived in Australia as a permanent visa holder or as the holder of a long term temporary residency visa you can apply for a Tax File Number at the ATO web site.
If you require a Tax File Number before you are physically in Australia – for example, because you want to make superannuation contributions before you arrive in an effort to optimise your superannuation balance – you can submit a paper application for a TFN, with supporting documentation.
If your circumstances require you to obtain a Tax File Number before you are in Australia bdh Tax can assist you with a paper application. Complete the enquiry form on this page for a free initial discussion.
There are special provisions under Australian tax law if you are living in Australia as the holder of one of most types of temporary residency visa.
If you can make use of these special provisions your overseas investment income is not taxed in Australia.
Similarly, capital gains arising on the disposal of many types of investments are not subject to tax in Australia – gains on the disposal of real estate in Australia being the main types of gain that remain taxable in Australia.
If you are in this situation – ie you are living in Australia as the holder of a temporary residency visa – it is recommended that you discuss your tax situation with an experienced tax firm such as bdh Tax, as in our experience many tax advisors in Australia are not familiar with these special provisions.
In our experience looking at the issue for clients there are frequently not significant differences between the tax payable between the two countries, but without preparing tax calculations it is not possible to answer this question.
If you would like to compare your after tax income between the two countries please complete the enquiry form on this webpage.
The rates of income tax in Australia are here.
Note that in Australia there is no special rate of tax applying to capital gains – a capital gain can be reduced (technically “discounted”) if the asset being sold has been retained for more than 12 months (from the date tax residency in Australian commenced, if owned at that date), with the discounted gain added to taxable income for the tax year in which the asset is sold.
The main issues to be considering are the relatively newly introduced capital gains tax obligations in the UK.
These came into effect on the 6th of April, 2015 and impact the sale of a residential property in the UK that is owned by a non resident person.
The disposal proceeds (after deducting allowable costs of sale) are to be compared with – usually – the market value of the property on the 6th of April, 2015.
The CGT Annual Exemption may be available to reduce the capital gain, as may Letting Relief.
The last 18 months of ownership should also be a CGT exempt period of ownership.
It is possible there may be no capital gains tax payable – but even if there is no CGT to pay there is a requirement to prepare and submit a Non Resident Capital Gains Tax return with HM Revenue & Customs within 30 days of the sale completing.
A NRCGT return that is lodged late is likely to trigger a late filing penalty – x 2 if the property is owned jointly by two non residents.
In short, you will need to prepare a capital gains tax computation under UK rules, and submit a NRCGT return with HM Revenue.
If you are a tax resident of Australia at the time of the disposal and cannot access the temporary tax resident exemptions discussed above a capital gains tax computation prepared under Australian rules may also be required.
The capital gain under Australian rules will probably have regard to the value of the property on the day you became a tax resident of Australia, or the day you were granted a permanent residency visa if you arrived in Australia as the holder of a temporary residency visa.
A former main residence can continue to be treated as CGT exempt for up to 6 years if it has been let after being occupied as your main residence, so long as you do not own another residence that you want to be treated as your CGT main residence.
This means that capital gains tax computations under the rules of the UK and of Australia are likely to be needed.
bdh Tax will be pleased to assist with all capital gains tax computations and related tax return requirements in the UK and in Australia.
Please feel able to contact us if you would like to discuss your situation and how we might help.