Leaving UK Tip 6 Landlord UK Property Rental Income

Published / Last Updated on 06/09/2023

When planning for leaving the UK or if you are already expat and living overseas, you may still hold property in the UK or may be thinking about keeping your UK property and renting it out.

Initial Points to Consider (if planning to rent out your main UK residence)

  • If you have a residential mortgage, have you spoken with your lender about a ‘consent to let’?
  • If already on a buy to let mortgage or your main residence mortgage lender does not offer ‘consent to let’, have you thought about conversion to a buy to let mortgage before you leave or if you are already overseas, the more difficult ‘expat buy to let mortgage’?  It is difficult when living in some countries to secure a UK expat buy to let mortgage due to your resident country regulations.
  • By renting out your main home, the period that you lived in the property is capital gains tax free as well as the last 9 months of ownership.  The period from when rent the property until 9 months before you sell/dispose of the property is subject to UK capital gains taxes.

UK Rental Income and Income Taxes

  • Rental income profits on UK property are subject to income tax in the UK (as well as additional taxes may be applicable in the country that you live in).
  • You are required to register for self assessment and submit yearly tax returns.
  • Your tenant or your letting agent is required by law to withhold income tax from the rent that they pay you and send these withholding taxes to HMRC.
  • A few years ago, HMRC had teams of inspectors making ‘arrow’ visits to letting agents across the country requiring agents to disclose the names and addresses of overseas landlords.  They are still doing this today.

How to Avoid Withholding Taxes on Rent

  • You need to advise HMRC that you have left or intend to leave the UK by completing a P85 form.
  • Complete HMRC’s SA1 for to register for self assessment (if you are not already set up for self assessment).
  • Register for HMRC’s non-resident landlord scheme using form NRL1.  Once registered, this will allow your tenant or agent to cease keeping withholding tax back from rents paid and allow you to be paid the gross rent paid.
  • You then complete self assessment returns in the normal way.
  • British nationals overseas are still entitled to the tax-free personal allowance currently £12,570.00 (tax year 06/04/2024 to 05/04/2025), so you may even get all rental income tax free in the UK if rental profits are below this level (or doubled up if you and your partner jointly own the property).  Don’t forget that taxes may still be payable where you live.

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