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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am a British citizen and resident. I have always paid

Customer Question

I am a British citizen and resident. I have always paid my taxes via PAYE. In July 2013 I rented my UK house out and moved to New Zealand. I registered for self assessment with HMRC before leaving the UK. I am working in New Zealand and although I had planed to only come for 12 months I am now planning on staying for a further 18 months (making a total of 2.5 years). The house is rented out for GBP12,000 pa independently of any agent and the rent is paid in to a separate bank account as per HMRC website. I am earning a salary of approx $100,000 NZD pa and having be paying tax to the New Zealand IRD on this via their PAYE equivalent. My question is how do I go about completing the self assessment tax return? I understand that if I was to be an 'overseas landlord' I would have to pay 40% tax on the gross rental. I could get a refund of the NZ tax this year but next year will probably not be counted as a UK resident next year? I do not want to pay tax on the NZ income twice and don't really want to pay 40% of the rental income especially if that doesn't take off any expenses. Is there any way I can pay the HMRC tax on the rental income in the UK (but not having to be an overseas landlord) and pay NZ IRD tax on the salary I am earning over here? Many thanks

Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Here is HMRC advice on this subject:

'Rental income from property in the UK

If you're not resident but still receive rental income from the UK, you will pay UK tax on that income. This type of income is dealt with by HMRC Non-resident Landlord Scheme. The scheme requires either your tenant or your letting agent to deduct basic rate tax from the rental income they pay to you if your usual home is outside the UK. You may need to complete a tax return to tell HMRC about the rental income and the tax already paid. You can make an application to receive rental income with no tax deducted when the rental income is paid to you but you will still be liable for the tax due.'

Remember you will still have your Personal Allowance, 10K this year, which will offset your rental income anyway. If the rental is below the 'Rent a Room Scheme' level it will not be taxed at all.

If you complete the form P85 on leaving the UK you will find the process with HMRC much easier to navigate. Then tell them when you return. This will split the tax years of departure into two portions under an extra statutory concession.

Under Double Taxation Treaties between countries, and there are literally hundreds of these you are rarely taxed twice on the same income, receiving a tax credit for the income charged by each state against taxation elsewhere.
Customer: replied 3 years ago.



Hi Keith


 


Thank you for you speedy reply. Can I just query a few points:


 


Is it possible to enter a P85 'late' as I left the UK last July?


 


Are you still entitled to the personal allowance if you are a 'non-resident landlord'?


 


Is the tax rate for the 'non-resident landlord' definitely the basic rate (20%), I was under the impression it was 40%?


 


As I am not using a letting agent can I just pay the tax I owe on the rental income at the end of the year?


 



Many thanks for your help in clarifying these points

Expert:  bigduckontax replied 3 years ago.
Yes, you can put in a P85 at any time.

As a UK citizen you are always entitled to your personal allowance.

You will normally be taxed at 20% and, as you don't employ a letting agent, you are responsible for paying tax to HMRC. HMRC may well prefer you to merely self assess and pay up annually. It makes it easier for everybody and less book keeping entries.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.