# Confused! - Rental Income on property in UK



## Lolito (Aug 25, 2012)

I keep looking on the web but I am rather confused by it all. Mind you, it doesn't take much to get me confused, lol! 

Let's say that I earn a rental income of less than 10k (9k) before deductibles, but 
according to the HMRC, I dont need to submit a tax return.

However after deductibles this goes above 2.5k, which means i do have to submit a return.

Can anyone advise, have I missed something?

Cheers!


----------



## CapnBilly (Jun 7, 2011)

Lolito said:


> I keep looking on the web but I am rather confused by it all. Mind you, it doesn't take much to get me confused, lol!
> 
> Let's say that I earn a rental income of less than 10k (9k) before deductibles, but
> according to the HMRC, I dont need to submit a tax return.
> ...


No, that's correct, but I think you'll find that also applies to UK residents, and non-resident landlords always have to submit a return. In addition, assuming you're a fiscal resident in Spain, you'll need to declare it here, although you can offset the tax paid in the UK. The allowances in Spain are better and you only pay tax on 40% ( I think this is right for this year, it used to be 50%). You may have to pay tax here, depending upon your net rental income, and you use of tax allowances here.


----------



## Megsmum (Sep 9, 2012)

CapnBilly said:


> No, that's correct, but I think you'll find that also applies to UK residents, and non-resident landlords always have to submit a return. In addition, assuming you're a fiscal resident in Spain, you'll need to declare it here, although you can offset the tax paid in the UK. The allowances in Spain are better and you only pay tax on 40% ( I think this is right for this year, it used to be 50%). You may have to pay tax here, depending upon your net rental income, and you use of tax allowances here.


if we rent our house here in the uk.. i am presuming the income os declared as part of our global income for tax purposes for us my pension, rental income. those then go against our allowances. BUT we still have to declare the asset... is the asset taxed?


----------



## CapnBilly (Jun 7, 2011)

cambio said:


> if we rent our house here in the uk.. i am presuming the income os declared as part of our global income for tax purposes for us my pension, rental income. those then go against our allowances. BUT we still have to declare the asset... is the asset taxed?


Not unless your assets exceed the current wealth tax limits.

The new asset reporting law (modelo 720) is an information gathering exercise, to try and ensure people are properly declaring their income. In addition, it also provides information for wealth tax, capital gains, and inheritance tax.

There are no new taxes (yet).


----------



## Dave and Anne Galicia (Nov 15, 2008)

Lolito said:


> I keep looking on the web but I am rather confused by it all. Mind you, it doesn't take much to get me confused, lol!
> 
> Let's say that I earn a rental income of less than 10k (9k) before deductibles, but
> according to the HMRC, I dont need to submit a tax return.
> ...


There are no doubt many British expats, tax resident in Spain who have not declared their UK rental income here. They may well complete a UK tax return (as they should) for the rental income and taking into account UK tax personal allowances and deductables have no UK tax to pay.

Many will be doing this on the basis of tax advice received in Spain from Gestors, Asesores etc. I was told by three different "experts" that as the UK rental income has to be declared in the UK, under the double taxation treaty it does not need to be declared here. One said if I did declare it here I should only declare the net taxable income and I would be charged on this small sum 3% tax as the tax rate in Spain is higher than the UK.

The dilema people now find themseleves in is having to declare their UK property as part of the new overseas asset reporting legislation and subsequently the Hacienda wondering if rental income is not being declared in Spain.

Interestingly I have friends in France who have been taxed there on UK rental income but have now had it refunded. UK rental income does not apparently have to be declared there, I presume due to specific elements of the double taxation agreement between the UK and France. 

THe one thing in Spain which is consistent is the inconsistency of the professional advice one receives and the interpretation of tax matters by the Hacienda !


----------



## nikkisizer (Aug 20, 2011)

Lolito said:


> Let's say that I earn a rental income of less than 10k (9k) before deductibles, but
> according to the HMRC, I dont need to submit a tax return.
> 
> However after deductibles this goes above 2.5k, which means i do have to submit a return.
> ...


Hello Lolito,

You will need to complete a UK tax return if:

- You receive £10,000 or more income from property (before deducting allowable expenses)

- You receive £2,500 or more income from property (after deducting allowable expenses) 

As the latter applies to yourself you will need to complete a UK tax return.


----------



## nikkisizer (Aug 20, 2011)

cambio said:


> if we rent our house here in the uk.. i am presuming the income os declared as part of our global income for tax purposes for us my pension, rental income. those then go against our allowances. BUT we still have to declare the asset... is the asset taxed?


Hello cambio,

Please refer to my previous post concerning the circumstances surrounding whether or not you should complete a UK tax return with regards to UK rental income.


----------



## CapnBilly (Jun 7, 2011)

nikkisizer said:


> Hello Lolito,
> 
> You will need to complete a UK tax return if:
> 
> ...


Nikki

As I think Lolito is a non resident landlord, my understanding is that they always have to complete a self assessment.


----------



## fyfin (Mar 17, 2013)

As someone who has moved permanently to Spain last October (not yet pensionable age) and started renting out our UK house in November I am very interested in this thread. I have always completed a UK tax return and this year I will include the rental income. As posted by Nikki it is obvious that most people who rent out a UK property and live in Spain will have to complete a UK tax return.

I'm not entirely certain of how the tax side of things will work for me in the future but I will be tax resident in Spain this year (2013) and I think I can choose a date e.g. 01.01.2013 as it is my intention not to return to UK.

Then I believe I can receive my annuities tax free in UK and declare them on my Spanish tax return (taxed more favourably as well). However, as far as I can see the only thing I will need to declare, in the future, on my UK tax return, is the UK rental income, and I suspect I will be able to retain my UK tax allowance and so pay no tax anyway in UK. (the rental income will be under £7,000).

I will also declare this rental income on my Spanish tax return and be taxed accordingly as normal income.

I would appreciate if anyone could confirm that I have this more or less correct although I will be taking advice but I like to know the ins and outs myself as there is a lot of conflicting advice around.


----------



## snikpoh (Nov 19, 2007)

fyfin said:


> As someone who has moved permanently to Spain last October (not yet pensionable age) and started renting out our UK house in November I am very interested in this thread. I have always completed a UK tax return and this year I will include the rental income. As posted by Nikki it is obvious that most people who rent out a UK property and live in Spain will have to complete a UK tax return.
> 
> I'm not entirely certain of how the tax side of things will work for me in the future but I will be tax resident in Spain this year (2013) and I think I can choose a date e.g. 01.01.2013 as it is my intention not to return to UK.
> 
> ...


The only point I would make is that you can NOT 'choose' a date. If you are tax resident, then the tax year runs from Jan 1st to Dec 31st every year. 

However, as you arrived in October, you will only be resident this year (2013) and so won't need to do a Spanish return until June 2014.


[at least, I think that's how it works).


----------



## titeuf (Sep 28, 2011)

We also arrived in autumn 2012 and therefore will not submit a Spanish tax return until June 2014 for 2013. However does anyone know please if we need to declare our foreign assets before the end of April 2013 or do we not enter the Spanish system at all until the following year.
Very grateful for any assistance, thanks very much.


----------



## Jeannie49 (Dec 17, 2009)

Im also confused. I have been resident since 2008 and rented out my UK property. I was told by 2 asesorias that I fill out tax form and pay tax in the UK which is what I have done and therefore dont need to complete tax form here. Now having completed by asset declaration form I have been told by a different asesoria that I will be fined for not filling in a tax form for the last 3 tax years.


----------



## fyfin (Mar 17, 2013)

Jeannie49 said:


> Im also confused. I have been resident since 2008 and rented out my UK property. I was told by 2 asesorias that I fill out tax form and pay tax in the UK which is what I have done and therefore dont need to complete tax form here. Now having completed by asset declaration form I have been told by a different asesoria that I will be fined for not filling in a tax form for the last 3 tax years.


As I understand it you have to declare it both to HMRC in UK and also to the Spanish Tax Authority, but you will only pay tax on the income once due to the double taxation treaty. I am in that position as from last December and that is what I have been told by tax experts in Mojacar.


----------



## StevejR1 (May 21, 2013)

An interesting thread....

.....I'm also thinking of moving to Spain, but keeping my house in the UK to rent out.

As a rough guide I should think the total income would be £14,500, but agency fees and expenses would bring that down to £8,000+(??) 

I gather that I'll then have to do a tax return in the UK, and Spain, and be taxed accordingly.

But what is this 'foreign asset tax/declaration' ?

Is there an allowance figure that you are allowed before you are taxed? And what is the tax rate?

My property in the UK would probably be valued at £320-380,000 at present.


----------



## CapnBilly (Jun 7, 2011)

Jeannie49 said:


> Im also confused. I have been resident since 2008 and rented out my UK property. I was told by 2 asesorias that I fill out tax form and pay tax in the UK which is what I have done and therefore dont need to complete tax form here. Now having completed by asset declaration form I have been told by a different asesoria that I will be fined for not filling in a tax form for the last 3 tax years.


You should have been completing a tax form, although the ironic things is, depending upon your situation, you may not have paid any additional tax. I think the fine for not submitting a return where no tax is payable is €100.


----------



## fyfin (Mar 17, 2013)

Steve.R said:


> An interesting thread....
> 
> .....I'm also thinking of moving to Spain, but keeping my house in the UK to rent out.
> 
> ...


That's a lot of fees and expenses so I'm guessing you have a mortgage. I am lucky that I do not have to use an agency as I have seen how they operate and it doesn't seem to be in your favour. Of course, if you have no other sensible option then that's all you can do.

As regards the asset reporting there has been a lot of speculation but as far as I am aware there is no new tax on assets apart from Wealth tax which was re-instated last year after having been abolished in 2008. The allowance is high at €700,000 so unless you have other assets you wouldn't pay any tax. Also it is an individual allowance so if the assets are jointly owned you each get the allowance and only declare half the asset. The tax rates are very low e.g. .2% but I suppose the danger is that once the Hacienda has all the data they could lower the threshold from €700,000 to a much lower figure and collect more taxes!

This link is helpful http://www.financespain.com/images/Expatriates_Financial_Guide_Spain.pdf


----------



## snikpoh (Nov 19, 2007)

fyfin said:


> That's a lot of fees and expenses so I'm guessing you have a mortgage. I am lucky that I do not have to use an agency as I have seen how they operate and it doesn't seem to be in your favour. Of course, if you have no other sensible option then that's all you can do.
> 
> As regards the asset reporting there has been a lot of speculation but as far as I am aware there is no new tax on assets apart from Wealth tax which was re-instated last year after having been abolished in 2008. The allowance is high at €700,000 so unless you have other assets you wouldn't pay any tax. Also it is an individual allowance so if the assets are jointly owned you each get the allowance and only declare half the asset. The tax rates are very low e.g. .2% but I suppose the danger is that once the Hacienda has all the data they could lower the threshold from €700,000 to a much lower figure and collect more taxes!
> 
> This link is helpful http://www.financespain.com/images/Expatriates_Financial_Guide_Spain.pdf


Just to be pedantic, wealth tax has always been there - it was NEVER abolished. What they did was to set the tax rate to 0% so that this could be raised without the need to go through parliament to introduce a 'new' tax.


----------



## fyfin (Mar 17, 2013)

snikpoh said:


> Just to be pedantic, wealth tax has always been there - it was NEVER abolished. What they did was to set the tax rate to 0% so that this could be raised without the need to go through parliament to introduce a 'new' tax.


Fair enough, I was just simplifying my response, in fact the rate was not reduced to 0% but instead a 100% tax credit was given against any wealth tax liability from 01.01.2008 and there was no requirement to file a return. The end result in any case is exactly the same!:eyebrows:


----------



## StevejR1 (May 21, 2013)

fyfin said:


> That's a lot of fees and expenses so I'm guessing you have a mortgage. I am lucky that I do not have to use an agency as I have seen how they operate and it doesn't seem to be in your favour. Of course, if you have no other sensible option then that's all you can do.
> 
> As regards the asset reporting there has been a lot of speculation but as far as I am aware there is no new tax on assets apart from Wealth tax which was re-instated last year after having been abolished in 2008. The allowance is high at €700,000 so unless you have other assets you wouldn't pay any tax. Also it is an individual allowance so if the assets are jointly owned you each get the allowance and only declare half the asset. The tax rates are very low e.g. .2% but I suppose the danger is that once the Hacienda has all the data they could lower the threshold from €700,000 to a much lower figure and collect more taxes!
> 
> This link is helpful http://www.financespain.com/images/Expatriates_Financial_Guide_Spain.pdf


Thanks for that.

Yes, I would still have a mortgage on the property...although there could be an option to pay it off, although it would obviously reduce our savings to live on.

I've not looked into agents in this instance, but my partner has had some experience of them through a holiday cottage letting situation a few years ago...and I have to agree that their percentage is very high for the actual work they do, but I'm not sure if their percentages would be lower on a long term let?

Our assets certainly wouldn't exceed £700,000...I wish!


----------



## fyfin (Mar 17, 2013)

Depending on your situation as regards other income etc it would likely be better to keep the mortgage and reduce the taxable income but that's probably worth talking to a tax advisor about.
My sister in law rents a property from a guy who owns only 3 houses in Suffolk and he was being charged 15% by the agency and then additional fees for quarterly inspections which consisted of a 5 minute look around as they could see my sister in law was a meticulous person and kept the property in great order (model tenant). The agency also used any tradesman to effect a simple repair e.g. tap washer at £70.
I intervened and suggested he would be better dealing direct with her and he had in fact tradesmen he used for renovations which he now uses for repairs where needed. He is one happy person now but the agency are being awkward regarding deposit held and won't pass it back to him or to my sister in law. (this was 2 years ago). I do believe it is being held by some third party as required by law but they should be able to retrieve it if both agree.

Anyway :focus: I do hope it all works out for you.


----------

