UK Buy to let tax implications?

Hi,

has anyone here any advice they could offer regarding tax on UK buy-to-let property?

Myself and my partner are buying an apartment in Belfast as an investment, but we are resident in Dublin.

Having contacted the UK Inland Revenue, I am aware that if we remain resident in Ireland, when we sell the apartment we can pay the CGT in Ireland rather than the UK. This is favourable, given that CGT in the UK is 40% and it is only 20% in Ireland.

What is less clear however, given the fact we are resident in Ireland but investing in the UK, is :

a. Will we have to pay income tax on the rent received, despite the fact it will not cover the mortgage repayments?

b. If so, is there any way we can minimise the tax we must pay on the rental income?

c. Where will the income tax be payable - the UK or Ireland?

We are taking out an interest-only mortgage with a UK bank to finance the purchase.


Any advice would be hugely appreciated.

when we sell the apartment we can pay the CGT in Ireland rather than the UK

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AFAIA you pay CGT in UK first of all unless there is some special arrangement with the UK that i'm not aware of.

a. Will we have to pay income tax on the rent received

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To Irish revenue unlikely, as the interest on the mortgage is greater than expeced rental income and the additional allowances allowed. See [broken link removed]

Check with the UK authorities re profit on rental income any tax paid in UK can be offset against rental income due on the property in Ireland.

b. If so, is there any way we can minimise the tax we must pay on the rental income?

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See comments and link above. Computation of Profit on rental income for tax thats due in ireland.

c. Where will the income tax be payable - the UK or Ireland?

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See above as well.

CGT will be 20% as UK do not apply CGT to Non-residents.

On the Rental income you will first be taxable in the UK. On the Rent less interest, management fees, expenses and capital allowance for W&T to furniture etc.

As your Irish resident you will be taxable also on the rental profit in Ireland, the computation is quite similar. However you will gwt a credit for the UK tax paid.

If I understand correctly your mortgage interest is greater than your rent so you should have no tax on rent in either UK or Ireland,

An important consideration however as a non resident landlord in the UK the tenant should withhold tax on the rent to you. To avoid this you can complete a form you will find on the UK Revenue website and this allows you to be paid the rent gross.

You will be making a rental loss at the beginning. You should do the calculation and carry it forward each year until you start making a profit and then can set it off against your profits.

Pegasus said:

You will be making a rental loss at the beginning. You should do the calculation and carry it forward each year until you start making a profit and then can set it off against your profits.

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Can you please explain how this is done - sorry I am new to investments !

See the link above showing how to calculate the taxable income. If the expenses are greater than income then you'll have a rental loss for tax purposes which can be deucted from your profit whenever you make one.
You don't actually have to do anything until you are making a profit after losses carried forward and then you should fill out Uk tax return & an Irish tax return. When I say "carry it forward" this doesn't mean you have to actually do anything with revenue until you're making a profit. You could keep all your figures together & have an accountant do it at that stage or do it yourself.

Property Investment FAQ

You should also consider getting independent, professional advice on the tax and other matters relating to such a property investment.

Pegasus said:

You don't actually have to do anything until you are making a profit after losses carried forward and then you should fill out Uk tax return & an Irish tax return.

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I believe in Ireland anyhow, it would be important to do tax return each year even if you are making a loss.ie each year you declare how much your loss/profit is for curent year, deduct your loss carried from previous year and declare how much loss(if any) to be carried to following year.