# Tax Allowances Renting Property



## chris&vicky (Feb 6, 2013)

I know that when selling your main UK residence there are allowances that you can get against CGT if using the funds to buy a new property in Spain but I thought I read somewhere an allowance against tax when renting your UK main residence to take up renting in Spain?

Maybe I am getting a little confused with something else I have read because I am unable to find it now. Is anyone aware of any such thing?


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## chris&vicky (Feb 6, 2013)

I have found what I read now. It is not what I said before. I really do not know what the allowances are for, or how they are calculated, any ideas? 

It reads "From 1 January 2011, a reduction of 60% is available against net rental income for residents of Spain before tax is payable, and includes any lettings income from outside Spain but not short-term holiday lets."

It was found here ... How income is taxed in Spain - AngloINFO Valencia, in Valencia (Spain)


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## CapnBilly (Jun 7, 2011)

You calculate the net rental income (I.e gross income less allowable expenses) and pay tax on 40% of the figure. Pretty similar to the uk, except in the UK you any tax on the full net rental income. Note, you have to pay tax in the UK, and also in Spain, although you can offset the tax already paid in the UK. Whether you will pay any more will depend upon how you use up your allowances.


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## chris&vicky (Feb 6, 2013)

CapnBilly said:


> You calculate the net rental income (I.e gross income less allowable expenses) and pay tax on 40% of the figure. Pretty similar to the uk, except in the UK you any tax on the full net rental income. Note, you have to pay tax in the UK, and also in Spain, although you can offset the tax already paid in the UK. Whether you will pay any more will depend upon how you use up your allowances.


Thank you for your reply. 

So if the tax paid in UK is more than tax due in Spain do you get a rebate, or why can't you just get your rent paid gross in UK?

That will probably mean I pay less tax than I thought, some good news at last!


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## CapnBilly (Jun 7, 2011)

chris&vicky said:


> So if the tax paid in UK is more than tax due in Spain do you get a rebate, or why can't you just get your rent paid gross in UK?


You wish. Unfortunately, under the DTA it works on the basis that you can offset tax paid, but if you've paid more than you owe on the same income in the other country, then thats just tough. You can apply to have it paid gross in the UK, but it is still taxable, as under the DTA its taxable in the country of location, and residence. However, you get your basic personal allowance, so if you have no other taxable UK income, and you expect your net rental income to be lower than the basic personal allowance you can apply for it to be paid gross under the non-resident landlord scheme.



chris&vicky said:


> That will probably mean I pay less tax than I thought, some good news at last!


Based on your first posts about income etc. I think that may be right, as your net rental income is probably under the UK personal allowance, so you will pay tax in Spain on the reduced amount.

The only point I would make is to make sure you keep all the receipts in case you are unlucky and get asked to provide evidence by the Hacienda, as well as a reserve for costs. You only get 10 days, and (this is the rub) you have to have them translated by an official translator (you can't do them yourself). I had to have a payslip (one) and an invoice translated, and it cost me €73, and I could have done myself in 10 minutes.


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## chris&vicky (Feb 6, 2013)

CapnBilly said:


> Based on your first posts about income etc. I think that may be right, as your net rental income is probably under the UK personal allowance, so you will pay tax in Spain on the reduced amount.
> 
> minutes.


I am not sure I quite get this, sorry. 

I estimate my net rent to be over the UK allowances, probably about £11k. Then I have some income from investments, about £3k, not much else in income unless I drown down on pension which is not necessary as I have savings. 

So my UK tax bill I guess would be around £1k. Am I not able to just deduct this from my Spanish tax bill?


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## CapnBilly (Jun 7, 2011)

chris&vicky said:


> I estimate my net rent to be over the UK allowances, probably about £11k. Then I have some income from investments, about £3k, not much else in income unless I drown down on pension which is not necessary as I have savings.
> 
> So my UK tax bill I guess would be around £1k. Am I not able to just deduct this from my Spanish tax bill?


Yep, sorry, just worked on assumed cost of 20%, and in my mind, I've already moved interest over to Spain, as the new DTA means it will no longer be taxable in both countries ( unless they're dividends in which case they're still taxable in the UK). So approx £600 of interest etc, can be offset against Spanish tax on interest etc, and approx £500 on rental income can be offset against Spanish tax due on rental income. This is based on my understanding of the DTA (both versions), but rather than quote that, I think the HMRC explanation when it's the reverse is much clearer. It says 

"
The amount of Foreign Tax Credit Relief (FTCR) that can be claimed on an item of income is always the smaller of:
• the amount of foreign tax paid, or allowed by treaty, and
• the amount of the UK tax chargeable on that item of income"



Don't forget if your property is in joint names then you can split it between you.


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