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bigduckontax
bigduckontax, Accountant
Category: Tax
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I'm an overseas landlord (just moved to Canada in Janaury)

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Hi there, I'm an overseas landlord (just moved to Canada in Janaury) and I want to understand how much tax I need to pay on rental income for my property in the UK. I am registered and approved as an overseas landlord with HMRC.
JA: Which tax year is this for?
Customer: 2019 and 2020
JA: Anything else you want the Accountant to know before I connect you?
Customer: Our property is jointly owned between me and and my partner. My partner is still receiving some income in the UK. I am not.

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

 

Did you move from the UK to Canada? Are you a citizen of an EEA country?

 

 

Customer: replied 15 days ago.
Yes, I moved on 2nd January, I have a Swedish passport but I lived in the uk for 8 years before I moved to Canada. I don’t pay any tax or have any income in Sweden. My partner who I own the property with is UK. Thank you!

You are liable for UK income tax(IT) on your net rental income ie 50% of the rentals. As a citizen of an EEA country you are entitled to the normal Personal Allowance (PA), currently 12.5K. When you moved to Canada did you send a Form P85 to your UK tax office?

Customer: replied 15 days ago.
No we didn’t, we haven’t done self assessment before as it’s all gone automatically through our employers. We have both filled in nrl1 forms and been approved through that.

So if our rental income (before any tax) is £2,300 per month, minus estate agency fees (let’s says it’s £200 a month), how much will we need to pay back when we do the self assessment?

Itis not quite as simple as that. Here is the list of normal deductions you can make from rental income, source: Which:

 

'Some examples of allowable expenses you can claim are:

 

water rates,

council tax,

gas and electricity

landlord insurance costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)

letting agents' fees

legal fees for lets of a year or less, or for renewing a lease of less than 50 years

accountant’s fees

rents,

ground rents and service charges

direct costs such as phone calls, stationery and advertising for new tenants

 

The expense should be incurred wholly and exclusively as a result of renting out your property.'

Read more: https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/allowable-expenses-and-allowances-atdn93l9wyqp - Which?

Customer: replied 15 days ago.
Yes, understood that, thank you! So essentially we are liable to exactly the same tax as if we were not non resident landlords? Ie, we’re just paying the tax later through self assessment, rather than it being deducted monthly through our estate agent?

Correct, although if you use a letting agent tax could still be being deducted.

 

This income could be subject to Canadian Tax also and you will have to rely on the Double taxation Treaty between the two countries, which precludes the same income stream from being taxed in both jurisdictions. This is achieved by means of tax credits, the tax deducted in one country being allowed as a tax credit against liability in an other.

 

 

Customer: replied 15 days ago.
Ok got it, so we should really get a tax expert to do this for us? It shoulda quite complicated to do ourselves?

On the contrary it is relatively simple and well within most people's ability.

Customer: replied 15 days ago.
Ok, thank you so much, one more question, can we claim back on mortgage interest?

Yes, but only at the basic rate of taxation, 20%.

 

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Thank you for your support.

 

Don't forget the P85, belt and braces so to speak. It is available on the web and can be filed online.