Expatriate status does not preclude you from United Kingdom taxation. Rent generated from UK property is taxable. Even if you do not receive a self assessment UK tax return, the onus is on you to notify the Revenue if you have a tax liability on letting income. Failure to do so can be met with heavy penalties.

You are required to keep sufficient records to enable you to accurately compute your letting profits. These include rental statements, receipts for bills paid and any other expenses incurred in the property letting. These should be kept for five years.

If you use the services of a letting agent you need to know that the law obliges agents to deduct tax from all rents paid after deduction of certain expenses. The agent will then account to the Revenue for this tax and submit annual returns regarding your property, gross rents, tax deducted etc. The agent will provide you with a tax certificate for use when preparing your tax return. Where there is no agent the same obligations will be passed to the tenant.

However, you can apply to the Revenue to receive your rental income gross. This has certain responsibilities particularly that your tax affairs must be up to date, that you have a good ‘tax history’ and that you comply with self assessment requirements including filing of tax returns and payment of any tax liabilities due on time.

That’s the bad news – the good news is that in most cases expatriates are entitled to full tax allowance on mortgage interest on loans used to purchase or improve a property. There is now no limit on the level of borrowing for which relief can be claimed, and relief is effectively given at your top rate of tax.

Most British expatriates are entitled to full tax allowances, and for jointly held property further relief is allowed in line with the independent taxation of husbands and wives. This gives rise to many tax planning opportunities with UK sourced income such as rents, pensions etc.

We would recommend that expatriate landlords seek the advice of specialist taxation accountants.

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