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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I am moving out of UK into EU, keeping my current job at 50%

Customer Question

Hi, I am moving out of UK into EU, keeping my current job at 50% (current pay 100% £42'000 pa + 10% pension contribution). In addition, I will rent out my property for £1'750 pcm. If not living in the UK, how will I be taxed for that in the UK and potentially in the other EU country? Is it wiser to start a "one-man" company/consultancy in the UK or in the EU country I am moving to and "bill" my employer for the days worked and pay pension etc. from this income?
Thank you
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Customer: replied 1 year ago.
Hi Keith
Customer: replied 1 year ago.
do you need further clarification for my above question or is all clear?
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be to help you with your question.

Firstly, when you quit these shores do not forget to send a Form P85 to HMRC? If you did not then you should do so immediately, fortunately there is no time limit as to its submission, it is available on the web and can be filed on line. That Department will then classify you as non resident and you will find dealing with HMRC much easier.

It is normal for rentals of your UK property to be taxed in the UK. You will be allowed your usual Personal Allowance against any income. You may also be liable for Income Tax (IT) or its equivalent in the other EU country, but under the Double Taxation Convention the same income stream can only be taxed in one jurisdiction. This is achieved by means of tax credits, the tax paid in one country being allowed as a tax credit against any liability in the other. The Convention does not protect you from differences in rates of taxation, however.

Your proposal to use a company for this matter is an over complication and quite simply not worth the effort involved.. Remember that these days the UK is regarded is something of a tax haven in the EU.

I do hope that you have found my reply of assistance.

Customer: replied 1 year ago.
OK! That means that I will have an taxable income of £21'000 rent + £21'000 - personal allowance. How will the national insurance contribution play into this and will I remain fully insured via the NHS?
Expert:  bigduckontax replied 1 year ago.

Rental income is outside the scope of NI contributions. Your other earnings will be subject to the social security system of the EU country in which you are living.

If you wish you can make voluntary contributions to NI and the relevant Department will send you a warning letter at the end of each tax year as to your lack of contributions and how to correct this.

Customer: replied 1 year ago.
34;This is achieved by means of tax credits, the tax paid in one country being allowed as a tax credit against any liability in the other. The Convention does not protect you from differences in rates of taxation, however." So simply speaking: Does this mean that if I pay income tax in UK, in Germany I will have to top up to whatever the rate is above the UK value? Or if I pay here, I will not have to pay anything else, even if the rate there would be higher.Further to the rental income: Since my partner and me both own the apartment 50%, I assume that we can split up the rent 50-50 so that we both will be able to benefit from the personal allowance (she will be working for a UN body, and thus her salary is free of taxation).
Expert:  bigduckontax replied 1 year ago.

If there is a difference between the German tax rate and the UK one then you will have to make up the difference. As, in general, the German rate is 25% there will be an additional sum to pay. As I told you the Convention does not protect you from such differences. The UK is, these days, considered a tax haven within the EU.

Yes, the rental is split 50/50 between you and your partner. Be very careful about the tax free status of UN pay 'The pay of UN employees is not tax free. All employees must pay staff assessments of from 28 to 34 per cent of their actual gross salary. (Only diplomats at the UN -- who are salaried representatives of their own governments and are not UN staff members -- are exempt.)' [source: Setting the Record Straight]. This should be checked with local tax authorities.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.

Thank you for your support.