Non-Resident Landlords - Professional Tax and Compliance Investors Package (brief overview)
The non-resident landlords (NRL) scheme is a scheme for taxing non-resident landlords on their UK property income.
The scheme requires local letting agents/tenants to deduct 20% from any rent they collect/pay to non-resident landlords, unless they have authority from the UK tax authority to pay the rental income without deducting 20% income tax.
Landlords, for the purposes of the NRL Scheme, include individuals, companies and trustees. In the case of partnerships, each partner is treated as a separate landlord in respect of their share of the rental income.
If you are not UK resident you will need to pay income tax on your property income, if the property is situated within the UK. The rules are the same whether you became non-resident when you moved from the UK to live or work full time abroad, or whether you have always been based abroad but have UK income or gains.
Normally where there is a double taxation agreement between the UK and your country of residence (or sometimes your nationality), you will get relief for UK taxes paid and you won't have to pay tax twice on the same income.
Generally you can expect the following tax implications:
A transfer tax is charged based on the consideration paid for the property. The rate varies between 0% - 7%*.
There is a 15%* duty payable for purchases over £500,000 (£2m if purchased before 20 March 2014) by non-natural entities (notably companies, trusts and foundations).
If you receive rental income on your UK property, you will pay IT on that income. Your taxable property income is calculated by taking your rental income less any allowable expenses/allowances.
All UK residents and some non-resident individuals are entitled to a personal allowance. Non-natural entities are not entitled to a personal allowance.
A personal allowance is an amount of income you can receive each year without having to pay tax on it. Non-residents can claim a personal allowance under current legislation or through a double taxation agreement. Since 6 April 2010 the entitlement for non-resident individuals who would have qualified for a personal allowance from IT solely by virtue of being a Commonwealth citizen has been withdrawn. However the vast majority of individuals affected may still benefit through double taxation agreements. Please see our information sheet "non-residents - who is entitled to a UK personal allowance?"
Also you would need to file annual UK tax returns by the filing due date. The filing due date and payment deadline for income tax is 31st January following the 5th April tax year.
Since April 2013 an annual tax is payable by certain non-natural persons owning residential properties. Relief is available, amongst others, if the property "is exploited or to be exploited as a source of rents from third parties as part of a property rental business". Thus relief will be available for the majority of NRLs, who purchase UK properties with the view of letting it out to third parties.
The ATED payable for 2014/15 based on the property value is:
- Less than £2m Nil
- £2m - £5m £15,400
- £5m - £10m £35,900
- £10m – 20m £71,850
- Over £20m £143,750
Additional bands will be introduced as follows:
- £1m - £2m £7,000 (Effective from 01-04-15)
- £500k - £1m £3,500 (Effective from 01-04-16)
IHT is normally charged on the value of the property upon death of the owner.
The IHT threshold (nil rate band, currently £325,000) is the amount up to which an estate will have no IHT tax to pay. Any amount over this would be subject to a 40% charge.
On selling of your UK property a tax is charged upon the difference between the acquisition price and the sales proceeds.
Previously non-residents were not subject to CGT, this all changed from 6th April 2013:
- From April 2013 non-resident non-natural entities owning an UK property with a value of more than £2m would be subject to CGT on disposal.
- It is also proposed that from April 2015 capital gains tax is also extended to all non-residents disposing of UK properties.
CGT will range from 18% to 28% depending on your income.
From April 2013 non-resident non- individual entities owning an UK property with a value of more than £2m would be subject to UK capital gains tax on disposal.
Also, an annual charge ranging from £15k to £140k per annum would become payable.
As can be seen from this brief overview the rules are wide ranging and complex. We can offer a range of tax planning and specialist advice to you, as careful consideration should be given to your specific circumstances.
In addition to this and specific to non-resident landlords we provide the following services:
- Registration for the Non-resident Landlord Scheme.
- Tax Return Completion and submission to HMRC.
- Full bookkeeping service, working with your letting agent to process the information.
- Register a new company, company secretarial and all accounting/tax services.
- Where a company holds the property investment all profits are subject to 20% company tax
Contact us today to discuss how we can help you.
Call the team today on +44 (0) 1784 439 955 or
*Please view our latest tax card tables for the relevant tax rates/allowances.