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potluck

Renting my uk house, pretty urgent

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Hello, i am a permanent resident that has moved to australia in april. I have settled down and now I start my first day of work on monday. I used to let my property in the uk a few years ago but moved into it in 2015 before moving over here. 

I thought i will keep it and rent it out still whilst i live here, incase i ever decide to go back to the uk. I naively thought it would be the same as it was back when i rented it last time, i just declare tax under a personal assessment and pay the tax in the uk. As i do not earn any other uk income now i thought that my personal allowance will clear my income so i will not pay tax on it. However when filling out forms for the agent, it asks for my over seas tax info etc. I googled it and now i've fallen down a rabbit hole full of loads of different advise and scenarios etc. I am basically looking for some advise on what is likely to be the case for my situation.

My basic wage for my australian job that i start monday, will be $67,184. However i will be required to do lots of overtime and i am pretty sure after roughly working it out i may end up with about $83000 a year.

My property in the uk should fetch £750 (A$1351 under current conversion rate) a month.  I will be paying 10% plus vat to the agent per month, so £90 (A$162). Every year i will be paying £100 (A$180) to renew tenancy and £50 (A$90) for tenancy deposit scheme. My mortgage cost is £328 (A$590) a month but that is on a repayment. The interest is roughly £173 (A$311) a month.

So to summarise:

Australian job Earnings : $83000

Yearly rental without any deductions: $16214

Agent fees per year: $1944

Interest on mortgage per year: $3732

Other fees for tenancy per year: $270

What is my likely tax bill going to be for the rental income? 

Can i deduct interest, agent fees etc to lower my tax bill? If not, it appears most my profits may go to tax and make it not even worth renting out so may have to look to sell it.

 

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I have a rental property here in Australia and I can deduct mortgage interest, agent fees, repairs etc. The ATO puts out a handy guide to all the things that can (and can't) be deducted. https://www.ato.gov.au/uploadedFiles/Content/IND/downloads/Rental-properties-2018.pdf

I'm pretty sure you can do with same with a rental property that's located overseas, but you'd need to confirm that.

Using your figures above, that means your $16,214 Rental income could be reduced by $5,946 leaving a net Rental income figure of $10,268.

Tax on $93,268 ($83,000 + $10,268) is $22,889 netting you $70,379.

If you didn't have the rental, tax on $83,000 is $19,102 netting you $63,898.

So having the rental increases your tax liability by $3787 but it does increase your net income by $6,481.

Used https://www.taxcalc.com.au to calculate the tax due.

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Have a word with Alan Collett BDHtax who is pretty well up on these maters. He is on this forum quite regular.

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Yes you can claim the same deductions on an overseas property. You may also be able to claim depreciation if your property isn’t too old or if you’ve done work on it recently


Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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Posted (edited)

The UK property is treated as though its located in Australia so ensure you keep ALL receipts for expenses you incur e.g. maintenance, agent fees, building insurance, grass cutting etc. I'm assuming you need the internet to manage the investment hence you will be able to deduct a portion (dependant upon usage) of your internet fees, office equipment, etc. I generally work out the income/expenses each month and if there is a net profit (in GBP) at the end of the financial year, I use the average GBP:AUD conversion rate during the financial year. It's probably worth going and discussing it with a tax agent with foreign income experience particularly for the first time.

If you do sufficient overtime to take you to $83000, with the additional investment income included, I'd do the sums to decide if salary sacrificing Super payments would be beneficial in order to reduce your assessable taxable income. This would not only reduce your immediate tax bill but provide an uplift to your Super in the long-term. Not tax advice but something else to consider and investigate because these matters can vary dependant upon age and personal circumstances.

 

Edited by le petit roi
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Posted (edited)

Thanks for the responses guys... so it does seem I will be able to deduct the interest which so far makes it seem a viable option.

If anyone else has any input regarding my original question please do provide it, I now have just stumbled over another hurdle that has put another spanner in the works....

The non-resident landlord scheme (in the uk)..... 

It looks like on paper, I will not get my tax free allowance in england and will instead have to pay 20percent tax on all my rental income there?? I don't really understand it? Is that what the scheme is? 

It says about my letting agent having to withhold 20 percent of my income and paying it to hmrc... is that the case even when earning under the personal tax relief threshold? 

If so, does that mean I can offset that tax paid to the uk hmrc, from my australian tax?

Will this then benefit me as I will be paying 20 percent tax instead of 32.5 percent? Or will it turn out I pay even more tax because I'll be paying tax in the uk and australia? 

 

Edited by potluck

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Posted (edited)

We rent ours out.  You have to declare the full rent as income, but you can offset the mortgage interest (not the mortgage), agents fees, any maintenance costs, costs for yearly certification like Gas Certificates, we pay around $3200 tax per year here for a rental income less than what you will be getting. 

You wont pay tax in both countries, you complete NRL1 as a non resident landlord and you dont pay tax in UK

Edited by AJ

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As above fill out the NRL1 form and you will not pay tax in the uk at source or at the end of the tax year (still have to do a return) if the rental income doesn't exceed the tax threshold. If you don't fill it in then the agent will deduct 20% and you have to claim it back via self assessment.

You are gonna be up for paying all of the tax Australia levies on rental income (at least aus let you deduct interest!) and wont get any credits on the uk tax already paid under double taxation rules because you haven't paid any!

We sold our uk home as we were settled here and don't ever want to return. We had no mortgage though and tax bill was going to be very high.

But I understand you wanting security if you want to return. Must say though its stressful being a landlord overseas, every storm that happens you dread the email saying there's a leak or fence fell down blah blah. Repairs cost silly money because they have you over a barrel.

 

 

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1 hour ago, can1983 said:

As above fill out the NRL1 form and you will not pay tax in the uk at source or at the end of the tax year (still have to do a return) if the rental income doesn't exceed the tax threshold. If you don't fill it in then the agent will deduct 20% and you have to claim it back via self assessment.

You are gonna be up for paying all of the tax Australia levies on rental income (at least aus let you deduct interest!) and wont get any credits on the uk tax already paid under double taxation rules because you haven't paid any!

We sold our uk home as we were settled here and don't ever want to return. We had no mortgage though and tax bill was going to be very high.

But I understand you wanting security if you want to return. Must say though its stressful being a landlord overseas, every storm that happens you dread the email saying there's a leak or fence fell down blah blah. Repairs cost silly money because they have you over a barrel.

 

 

We have been overseas landlords for over 20 years and it does depend on the type of property you are renting out, as to how stressful it can be.. Originally we rented out our 1911 family home, and soon realised it was impractical due to its age. We have always had good agents, who take care of everything, but contact us if there is a problem. 

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2 hours ago, ramot said:

We have been overseas landlords for over 20 years and it does depend on the type of property you are renting out, as to how stressful it can be.. Originally we rented out our 1911 family home, and soon realised it was impractical due to its age. We have always had good agents, who take care of everything, but contact us if there is a problem. 

Agree. The trick is a good agent you can rely on to be fair to you and the tenants and have good handymen and tradies that don’t charge the earth.

we let our house in Australia from the UK so other way round but the agent was our best investment, she became a friend. When part of a tree fell and damaged the house the first we heard was an e mail about the incident, along with the insurance claim, already approved and estimates for repairs. She had also been personally to see the tenants and to arrange to secure the roof until repairs took place.  She also contacted the council to have the remaining tree, on a neighboring property, noted as dangerous and liaised to have it felled.  All this at no extra charge.  We did send her a thank you bouquet though!

Well worth the (deductible) expense, she has since left the agent to work in the family business of farming.  I will, however be taking her out to lunch soon to ask for advice on a property investment we are considering. 

 

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So many wineries ......so little time :yes:

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Thanks again guys for the answers. I have filled the paperwork out for my agent and it will be going up on the rental market this weekend hopefully. I am in the process of filling out the NRL1 form, but need my agents reference number before i can proceed. 

As another side note, i was asked if i was a UK resident for some landlord insurance quotes, so i googled that and i saw lots of people stating that normal landlord insurance doesn't cover you if you are an over seas resident and saw some horribly high quotes for the insurance (admittedly they did appear to be older posts though so not sure if it is still relevant).I have found a company that i declared i was not a UK resident and they asked if it was being let through an agent. I said it will be and they were happy to insure me under the normal landlords insurance (i rang to double check but they said i am covered which is great!).

I can't believe how much of a pain it is to do this compared to just living in the UK but i guess that is all part of the learning curve. Pretty sure when i remortgage (usually remortgage after my fixed term is up to keep the rate down) i will have to go on to another different mortgage for overseas residential landlords as oppose to the normal buy to let etc style mortgage which will be another pain in the backside (mortgage advisor has already prewarned me about the rubbish rates and lack of options etc).

If anyone has any other advice or any experience with getting a mortgage on a rental in the UK without a UK address please feel free to share your input. Hopefully it is not as bad as i am thinking. 

Thanks

 

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Try Direct lIne for Landlords insurance.  

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22 minutes ago, potluck said:

Thanks again guys for the answers. I have filled the paperwork out for my agent and it will be going up on the rental market this weekend hopefully. I am in the process of filling out the NRL1 form, but need my agents reference number before i can proceed. 

As another side note, i was asked if i was a UK resident for some landlord insurance quotes, so i googled that and i saw lots of people stating that normal landlord insurance doesn't cover you if you are an over seas resident and saw some horribly high quotes for the insurance (admittedly they did appear to be older posts though so not sure if it is still relevant).I have found a company that i declared i was not a UK resident and they asked if it was being let through an agent. I said it will be and they were happy to insure me under the normal landlords insurance (i rang to double check but they said i am covered which is great!).

I can't believe how much of a pain it is to do this compared to just living in the UK but i guess that is all part of the learning curve. Pretty sure when i remortgage (usually remortgage after my fixed term is up to keep the rate down) i will have to go on to another different mortgage for overseas residential landlords as oppose to the normal buy to let etc style mortgage which will be another pain in the backside (mortgage advisor has already prewarned me about the rubbish rates and lack of options etc).

If anyone has any other advice or any experience with getting a mortgage on a rental in the UK without a UK address please feel free to share your input. Hopefully it is not as bad as i am thinking. 

Thanks

 

Remortgaging from Australia is almost impossible. There are a few people who've managed it via an expat scheme but you'll probably find staying on the Standard Variable Rate from your existing lender after your fixed term has expired is the cheapest option available to you. The problem in my opinion is the requirements on the lender to comply with both UK and Australian lending and financial advice rules.


Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

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I obtained UK landlord insurance through a broker....too easy. I've used him for several years now and each year he searches out competitive quotes for my consideration.

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On 10/07/2019 at 20:45, SPRINTER said:

Have a word with Alan Collett BDHtax who is pretty well up on these maters. He is on this forum quite regular.

Feel able to ping a private message to me if you would like a freebie chat.

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com

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On 11/07/2019 at 00:35, potluck said:

Thanks for the responses guys... so it does seem I will be able to deduct the interest which so far makes it seem a viable option.

If anyone else has any input regarding my original question please do provide it, I now have just stumbled over another hurdle that has put another spanner in the works....

The non-resident landlord scheme (in the uk)..... 

It looks like on paper, I will not get my tax free allowance in england and will instead have to pay 20percent tax on all my rental income there?? I don't really understand it? Is that what the scheme is? 

It says about my letting agent having to withhold 20 percent of my income and paying it to hmrc... is that the case even when earning under the personal tax relief threshold? 

If so, does that mean I can offset that tax paid to the uk hmrc, from my australian tax?

Will this then benefit me as I will be paying 20 percent tax instead of 32.5 percent? Or will it turn out I pay even more tax because I'll be paying tax in the uk and australia? 

 

Are you sure you will be able to deduct the expenses... I've had a look through the Oz tax return form, and it doesn't appear that this is the case.

As for remortgaging, forget about it. HSBC do expat mortgages, but one of the conditions is that you earn more than £75k equivalent p.a.

If you go via HSBC Jersey, you'll need to have £50k in savings with them.

There are some specialist lenders who caters for prople who have emigrated to Oz, however, the interest rates are absurd, with more restrictive LVR. Not including the associated fees such as booking fees, agent fees, valuation fees etc...

Some of them have a minimum loan amount of £100k.


IELTS : 13/08/16: W8 S8 L9 R9. F2w ID Check/Rcvd: 15/08/16, 23/08/16 HCPC/SoR CoGS sent: 23/08/16. Skills Ax sent/Rcvd/granted: 30/08/16, 12/09/16, 10/10/16. AHPRA sent/AIP : 05/09/16, 28/12/16. EoI/invited: 20/1/17, 01/02/17. 189 submitted: 06/02/17, Caseworker: 23/02/17. Medicals: 31/03/17. Grant: 12/04/17. Child 101 submitted: 09/06/17. Granted: 06/07/17. Landed: 01/09/17.

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41 minutes ago, DukeNinja said:

Are you sure you will be able to deduct the expenses... I've had a look through the Oz tax return form, and it doesn't appear that this is the case.

It may not be obvious on the form, but you can always deduct expenses incurred in the earning of income.  


Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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2 hours ago, DukeNinja said:

Are you sure you will be able to deduct the expenses... I've had a look through the Oz tax return form, and it doesn't appear that this is the case.

 

Yes you can, we do our tax through an agent, (a good one not H R Block!) and we can deduct expenses like Agents fees, mortgage interest, repairs etc, we had to replace a fence and the oven last year and these were deducted.  Also there is a lot more safety certs to be done in UK, some have to be renewed every year and these are deductable. 

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23 minutes ago, AJ said:

Yes you can, we do our tax through an agent, (a good one not H R Block!) and we can deduct expenses like Agents fees, mortgage interest, repairs etc, we had to replace a fence and the oven last year and these were deducted.  Also there is a lot more safety certs to be done in UK, some have to be renewed every year and these are deductable. 

Thanks for the reply AJ and Marissa. I'm in the process of doing my tax returns, and I believe I have found this section.


IELTS : 13/08/16: W8 S8 L9 R9. F2w ID Check/Rcvd: 15/08/16, 23/08/16 HCPC/SoR CoGS sent: 23/08/16. Skills Ax sent/Rcvd/granted: 30/08/16, 12/09/16, 10/10/16. AHPRA sent/AIP : 05/09/16, 28/12/16. EoI/invited: 20/1/17, 01/02/17. 189 submitted: 06/02/17, Caseworker: 23/02/17. Medicals: 31/03/17. Grant: 12/04/17. Child 101 submitted: 09/06/17. Granted: 06/07/17. Landed: 01/09/17.

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8 hours ago, DukeNinja said:

Thanks for the reply AJ and Marissa. I'm in the process of doing my tax returns, and I believe I have found this section.

You'd be well advised to get a tax agent to do it for you.   I've always done my tax myself but once I had an investment property, I used an agent.   It's complicated and when you eventually sell, there's other calculations to do.  You can claim the agent's fee as a tax deduction so it's not as painful as it sounds.  Tax returns completed by agents are less likely to be questioned by the Tax Office, too.


Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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