Sunday 2 March 2014

Rental income on residential property

You are receiving taxable income that you need to declare if you are receiving rental income in the UK from residential property.

This applies whether you are in the UK or overseas.

There are penalties for failure to declare and HM Revenue & Customs have advised that they are clamping down on undeclared income in this area.

If you have not previously notified HM Revenue & Customs of this income, they are currently offering an opportunity for you to bring your affairs up to date on more favourable terms than would normally be available.

There are various reliefs and deductions available so it would be wise to consult a good accountant if you are in this situation. The potential savings could well outweigh their fee.

If you have never lived in the property you will have to pay capital gains tax on any profit when you sell.

Unless you have lived in your house for the whole period of ownership, you may still have capital gains tax to pay on some of the profit.

There are a couple of recent changes that you should be aware of.

If you have let the house in which you have lived, you are eligible for principal private residence (PPR) and lettings relief against any capital gain. Under the current rules since 6 April 2014' the last 18 months are added to the period in which you lived in the property to work out the proportion of time for principal private residence relief. Before 6 April 2014, this additional period was 36 months.

Prior to April 2015, if you were overseas and not a UK tax payer, you were not subject to capital gains tax on the sale of a UK residential property. This changed from 6 April 2015. Capital Gains Tax  will be payable on the post 6 April 2015 gain at 18% and/or 28% depending on the amount if gain and your individual circumstances in relation to UK personal tax.

Property can be a complex area for UK taxes. Apart from income tax and capital gains tax, you may need to consider VAT and stamp duty land tax. Good planning is crucial.
If you have specific questions, please drop me an email.