Renting out house in uk

[Melshel]

Hi

Only posted once on here but really need to get a move on with everything but does anyone know if you get taxed on rental income in uk if you've already paid your house off & are leaving the country? Also we live in Manchester so would be flying from here though the flights for taking your dog appear to be only from Heathrow is this true? Thanx in advance 

[Peach]

You may not be taxed in the UK (if your rental income is under the tax threshold) but you will need to declare it on your Australian tax return (unless you’re on a temporary visa).  You will likely have to pay tax on the income in Australia.

[Yelverton]

You will still need to declare the rental income in the UK but may not be taxed if you are under the threshold. You will need to fill in a Non-resident landlord form with HMRC (Form NRL1) to receive your rental income without deduction of tax

As Peach said, you also need to declare it in Australia but won't be taxed on it if you have already been taxed in the UK due to reciprocal tax agreements between UK and Australia

[Jay2016]

Which tax is higher? UK or Oz? I'm guessing UK

[Skani]

On 2/1/2018 at 11:15, Jay2016 said:

Which tax is higher? UK or Oz? I'm guessing UK

Tax in Oz varies according to total taxable income = total income less allowable deductions and rebates.  I'm not au fait with current UK taxation but I'd think you'd have to know someone's personal financial details  before making that assumption.

[Plentymech]

On 2/1/2018 at 08:31, Peach said:

You may not be taxed in the UK (if your rental income is under the tax threshold) but you will need to declare it on your Australian tax return (unless you’re on a temporary visa).  You will likely have to pay tax on the income in Australia.

Is that 100% correct as I asked my tax agent here a while back about this and he advised it was nothing to do with the ATO. Any income generated by a UK rental property that is above your tax threshold attracts UK tax and is paid to the UK tax office, you don't get double taxed by both countries. Just repeating what I was told.

[Marisawright]

31 minutes ago, Plentymech said:

Is that 100% correct as I asked my tax agent here a while back about this and he advised it was nothing to do with the ATO. Any income generated by a UK rental property that is above your tax threshold attracts UK tax and is paid to the UK tax office, you don't get double taxed by both countries. Just repeating what I was told.

He's half right.   You won't get taxed twice, but you do have to declare the income.

The rule is that you must declare ALL income on your Australian tax return, no matter where in the world you've earned it.  However, you also declare the tax you paid in other countries, and the Australian tax office will take that into account.  

I admit I'm not clear exactly how they work it out - do they just say, "this income has been taxed in the UK so we won't touch it", or do they say, "this property has been taxed in the UK already, but under Australian law it would be taxed higher (lower), so we're going to take a bit extra (provide a refund)".

This is why, if you have income in two countries, it's really important to have a tax agent who understands both UK tax and Australian tax.  I recall a couple of years ago reading about someone who'd had the same advice as you from an Australian tax agent, hadn't declared his UK rental income, and got fined hundreds of dollars. 

[Jay2016]

I'm not sure about what I'm about to say but I think Oz income tax rates are lower than UK which makes me think you'd be charged less in Oz. Plus on another point, income tax in general, a bloke at the gym who loves Oz and wishes he was back there (the wife made him go back to UK) he was self-employed in Oz and the amount of stuff he could claim for to reduce Tax was huge and he paid very little Tax so for him yes Oz is expensive but you pay less tax and in theory get paid more compared to UK.albeit he left years ago so had not experienced the last ten years of price rises in Oz (then again he would be mortgage free and retired)

[Alan Collett]

It is quite possible that the only income that is taxable in the UK once you have migrated to Australia will be the UK let property income (less allowable expenses).

This may be less than your personal allowance - as already noted.

By contrast in Australia your worldwide income is likely to be taxable, so if you have other income that exceeds your tax free threshold (Australia's equivalent of the personal allowance) it is Australia where tax will impact your net rental income.

So ... the objective of the tax planning exercise becomes one of reducing your let property income for Australian tax purposes, which is where obtaining a tax depreciation report can be valuable.

Those who would like to know more about the depreciation report, or who would like assistance with tax returns (UK and/or Aus) should feel able to send a message to me.

Hope this helps!

[Jay2016]

It is quite possible that the only income that is taxable in the UK once you have migrated to Australia will be the UK let property income (less allowable expenses).
This may be less than your personal allowance - as already noted.
By contrast in Australia your worldwide income is likely to be taxable, so if you have other income that exceeds your tax free threshold (Australia's equivalent of the personal allowance) it is Australia where tax will impact your net rental income.
So ... the objective of the tax planning exercise becomes one of reducing your let property income for Australian tax purposes, which is where obtaining a tax depreciation report can be valuable.
Those who would like to know more about the depreciation report, or who would like assistance with tax returns (UK and/or Aus) should feel able to send a message to me.
Hope this helps!

Hi Alan, I would like to know more about this report please. Let's say the Taxable Income (after allowable expenses) was £12,000/year on a UK rental. The UK Personal Allowance is say £11,500. Then in theory UK Tax = £500 x 20% = £100/yr. So tax is paid. But do you ALSO need to pay tax in Oz on that UK rental?? Double Taxation kindest regards j

[Alan Collett]

1 hour ago, Jay2016 said:

Hi Alan, I would like to know more about this report please. Let's say the Taxable Income (after allowable expenses) was £12,000/year on a UK rental. The UK Personal Allowance is say £11,500. Then in theory UK Tax = £500 x 20% = £100/yr. So tax is paid. But do you ALSO need to pay tax in Oz on that UK rental?? Double Taxation kindest regards j

Hi Jay2016.

Yes, if you are tax resident in Australia income from UK property rental income (net of allowable deductions, as permitted under Australian tax law) is taxable in Australia, assuming you are unable to make use of the temporary tax resident exemption.

In the example you have noted the A$ equivalent of the £100 should be creditable against the Australian tax liability - it is what is known as a foreign income tax offset.

https://www.ato.gov.au/Individuals/Tax-return/2017/In-detail/Publications/Guide-to-foreign-income-tax-offset-rules-2017/?page=3

Best regards.

[Jay2016]

Thanks Alan only just seen your post today 12March!