Tax implications of owning a UK investment property

[berlininvest]

I own a flat in the UK.

It used to be my principal private residence but not any more.

I now live in ireland and my PPR is here.

I have the flat rented out.

I have a mortgage on it, interest only.

Up to now (2 years), the rent covered the mortgage + maintenance fees.

So, no profit as such.

1. Do I need to include all this in my UK tax return?

2. Should it go on my irish tax return?

3. What are the capital gains tax implication when I go to sell the place?

4. How is capital gains calculated - is it the increase in value after i left or since I bought it originally?

5. Can I avoid CGT in any way?

6. Will the CGT go to the UK or irish revenue?

7. If the rent starts to turn a profit (due to lower mortgage because of lower interest rates), do I include that in my tax return? How much will I be charged in tax on this?

Thanks very much for any advice.

 

[qeivinc]

Liable for income tax on rental income in the UK and CGT in Ireland.

You need to register as a Non-resident landlord with the UK Inland Revenue and make annual returns irrespective of profit/loss.
Losses can be carried forward against any future profits.

CGT if any, payable to Irish Revenue at Irish rates which are currently lower that the UK.

Not sure how the fact that it was your PPR impacts CGT, ie proportionate gain or reduced CGT rate.

 

[Arch2]

When you register as a non resident on the form you complete expected rent and expected costs the UK revenue may not require you to file a return as long as you undertake to start making returns if the rent exceeds the costs.

If you are Irish resident you are also entitled to some tax allowances in the UK (the UK are more generous that Ireland is in reverse situation) approx £5,000. So unlikely you will have any UK tax.

 

[colingmurphy]

Rental Income​

Option 1 – Pay income tax upfront​

Unless nonresidents take specific steps (Option 2) they will be taxed on net rental income sourced from the UK at a flat rate of 20%, which must be withheld by the tenant or letting agent.


The taxable profit from rental income earned by UK residents is added to your overall UK income and taxed at the appropriate bands. There are many deductions and expenses allowed.

Option 2 – Receive untaxed income and pay tax afterwards

A nonresident landlord may opt to receive his rent untaxed, and choose to file a tax return instead. He will need to fill in form NRL1 (for individuals) or NRL2 (for companies) or NRL3 (for trustees).​

This option may be rewarding for those nonresidents eligible to claim UK allowances, such as residents of an EU country. The income taxation bands are as follows:

Up to £2,230: 10%​

£2231 - £34800: 20%


Over £34,800: 40%



Capital Gains

Individuals who are not resident in the UK are not liable to capital gains tax on the sale of UK property unless they have been resident in the UK within the past five years.
If the latter is the case or if you are a permanent UK resident, you would be liable to an 18% flat rate on any property gains during the 2008/9 tax year. Indexation and tapering reliefs have been abolished along with the entire previous income-tax based CGT system.​