tax demand for property let though an agent

Discussion in 'Finance, Property, Law' started by two_of_seven, Feb 5, 2011.

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  1. Hello
    I will seek some official advice on this on monday, but hopefully some property expert could put my mind at ease in the mean time:

    I had bought a flat to rent it out via a UK based Letting agent, who I undestand have to pay 20% tax on any income they receive (unless they have an authority from HMRC to the contrary)

    My understanding was that if this was my only owned \ mortgaged property, that 20% fulfilled my tax obligations?

    Is it likely they will try & sting me for more tax?

    2
     
  2. You will have to fill in a self-assessment tax return each year, if you live abroad, you can receive the income net of tax, but each year you'll have to pay via PAYE when your tax code gets adjusted. If it is your only property, you can write to HMRC and get your election noted that this is your primary residence for tax purposes. That means that when you sell it, you don't get spanked for Capital Gains Tax. I'm not an accountant or tax adviser, so please speak to someone better qualified, but hopefully this saves you going down a few blind alleys.
     
  3. You also need to lok at what country it is in - some countries will ask you to pay tax there, not here. I know me & Mrs EDM have a flat in Cyprus and we are liable for the tax over there, depending on how much it makes. It rents for less than the mortgage, (By about Euros 10) but on sale the tax is 20% of any profits made soley on the property (There is a 10,000Euro buffer zone first). This does not take in to account and land registary fees, solicitor fees etc, but the UK will take those ibn to account on most occasions (Please check out).
    So do check that you won't have to pay tax in both countries OR that you should be paying tax there, not here.

    N.B. We have a Cypriot bank account and our cash goes in to that, plus our mortgage is in Cyprus, so that really makes it a Cypriot deal, not UK.
     
  4. Spanner covered the basics although you may be able to stay away from the self-assessment bit if your tax affairs are simple (but letting property isn't always that simple).

    However, you still have to submit a tax return to the Revenue and pay any tax due by the required date. You need to read the HMRC website.

    All agents are told to deduct the 20% tax if the landlord is based overseas. No argument. You can ask the Revenue for an exemption and pay the tax yourself after submitting the final calculations each year.

    There are various allowances that you can claim but your profit (and your idea of a profit will not usually meet with the Revenue's approval...) will be added to your income and taxed accordingly.

    Litotes

    Edited to clarify...
     
  5. The above pretty much covers the position, by using an agent though their fees, certain essential repairs at the property, mortgage interest etc should be tax deductable and so the tax liability will depend upon how you have geared your investment. Most agents use management software, CFP, Carl etc and so when looking to pull together your net income ask them for a one page consolidated statement covering the whole tax year. This will save you time and money if using an accountant to submit your self assessment (whose fees should also be tax deductable). For information relating to gaining non resident landlord status and not having the 20% deducted each month you will need to complete an NRL1 form which can be downloaded from HMRC at HM Revenue & Customs: NRL1