Owners of rental property in the UK, who are non-resident there, are liable to pay taxes and must apply for a NIN or National Insurance Number.
An individual is considered non-resident in the UK, if s/he does not spend 183 days or more in any tax year in the UK or does not have their primary residence there. The tax year in the UK runs from 6 April to the following 5 April and the return is due by 31 January of the following year.
An Irish resident landlord must adopt the NRLS unless s/he elects to file a UK tax return under NRL.
Non-Resident Landlords Scheme (NRLS)
The letting agent for the property, or if no agent is acting, the tenant, must deduct basic rate tax (currently 22%) at source and pay this over to the Inland Revenue. Any tax paid to the Inland Revenue on the Landlord’s behalf is held as a tax credit against the Landlord’s final tax liability.
Non-Resident Landlord (NRL)
Irish resident landlords are liable to UK income tax on income from properties within the UK and must file a UK Tax Return.
Furnished Holiday Lettings (FHL) properties are treated differently from other properties for tax purposes. These are particularly useful for the astute property investor, as many of the tax benefits that a taxable trade enjoys are applied to such income (without actually being regarded as a trade). These include many allowable expenses, 50% capital allowances on furniture and equipment for year one (25% p.a. thereafter), loss relief against other income and not just rental income, lower 10% UK CGT rate on first £1m gain on disposal (entrepreneur’s relief) also can defer the payment of UK CGT by availing of rollover relief if the proceeds of sale are reinvested within 3 years. There is also a favorable scheme to encourage landlords to make their FHL environmentally friendly.
Landlords wishing to claim such status need to ensure that all properties under the claim qualify and meet all of the conditions. There are tax consequences where
Taxes payable when purchasing a property are as follows:
UK Stamp Duty/Land Tax is payable when you buy land/property. The tax depends on the region and the rates vary from 1% to 4%.
The VAT rate in the UK on the purchase of property is 17.5%.
Ongoing property taxes payable in the UK are as follows:
UK Personal Income Tax is payable in the UK on rental income earned. The rates vary between 20% and 40% depending on the levels of rent received.
UK Local Property taxes (Council Tax) apply in the UK and the liability falls on the tenant residing in the property. The tax is calculated on a daily basis and varies per region.
Other applicable taxes are as follows:
Capital Gains Tax As an Irish resident individual, you are exempt from UK CGT should you dispose of your UK investment property – therefore you will only be liable to Irish CGT of 20% of the actual gain, this is payable in Ireland (subject to the usual Irish CGT rules).
Inheritance & Gift Tax Non UK residents are not liable to UK CAT – therefore as an Irish resident individual only Irish CAT at 25% on the actual gift is payable in Ireland – this is subject to usual Irish thresholds.
Property Tax International can organise the completion and filing of all necessary UK tax returns in addition to advising on your property tax obligations in your home country.
The information provided here is intended as a guide only. While Property Tax International Limited makes every effort to ensure that the information contained herein is accurate, we take no responsibility or liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon.
Property Tax International Ltd is part of The Taxback Group incorporating Taxback International and Taxback.com, which have been providing international tax advice since 1996
