If you are living in Sydney and are renting out a property in the UK there are some important tax planning and tax return issues to consider.
HM Revenue & Customs in the UK will expect you to be lodging a UK tax return each year – if you don’t you might be subject to interest and penalties.
Similarly, as a tax resident of Australia the Australian Taxation Office requires you to include details of your UK let property income in your Australian Tax Return – unless you are a temporary tax resident of Australia when income from your UK rental property is not taxable in Australia.
More specifically:
In the UK
A surplus of UK property rental income over allowable rental expenses means you have a profit from your rental income, which is taxable in the UK, even if you are not a tax resident of the UK.
Also, once you leave the UK to live abroad your tenant (if you have not appointed a letting agent) or the letting agent (if you have) is required to deduct income tax at the basic rate from your rental income less the allowable expenses, and must pay this to HM Revenue.
However, you can apply to HM Revenue for approval for your property income to be paid to you without tax being deducted under the Non Resident Landlord (NRL) scheme.
Unless you have prior agreement from HM Revenue you are expected to submit a UK Tax Return each year, even if the rental expenses exceed the rental income.
Allowable rental expenses include mortgage interest (not capital repayments), and if you are a citizen of the UK or Australia you can usually expect to be entitled to the UK personal allowance, x 2 if the property is owned by a couple who are now living in Australia.
The personal allowance often absorbs most if not all of the surplus rental income, meaning that little if any tax is payable to HM Revenue in the UK.
In Australia
Having moved to Sydney and become tax resident in Australia most taxpayers – save for temporary visa holders, as discussed above – are chargeable to tax on their worldwide income and capital gains.
As a result, you should plan to include details of your UK property income on your Australian Tax Return.
The net income after allowable deductions is added to income that is taxable in Australia.
You will be given credit for any tax you have paid in the UK when computing the balance of tax that you have to pay in Australia.
bdh Tax is experienced in handling income tax and capital gains tax in the UK and in Australia.
If you are living in Sydney and have a property in the UK that you are letting and would like to discuss your situation with us please complete the enquiry form on this webpage, or telephone bdh Tax in Sydney on 02 9169 5919.
We will be pleased to have an initial free discussion about your situation, how we might help, and to advise our fees if you decide to instruct us.