Idiots guide to UK Property (Currently in the UK and plan to move to NSW)

[fusela]

Hello Everyone,

I've had a good look over this forum but can't find what I am looking for and am hoping that the forum can help.

My Wife, Daughter and I are all dual UK/Australian Nationals, we all last lived in NSW 5 years ago and are planning to move back.

Since living in the UK, we have aquired a property and need to examine to options of keeping/selling the property.

We are on a fixed rate mortgage which ends this year.

The options as I see them are:

1. Sell the property prior to moving to Australia

• As this is our Primary Residence in the UK there will be no CGT
• What would be the impact of this in the transtion year - would any tax be payable to the ATO on the sale of the house?

2. When the fixed rate mortgage ends - transition to a Buy to Let Mortgage.

• I see from the board that re-mortgaging in the future is difficult
• What are the implications of sellng in the future?
• Where would tax be payablel in the furture?  The UK, Australia or both?

 

I know lots of you will have been in this situation before so would love to hear your experiences.

My last move to Australia was much more simple - No property, No wife and no child!

 

Thanks!

Fusela

[Marisawright]

No tax payable in Australia on the sale of the house you live in

[DIG85]

1. No tax in either the UK or Aus if you sell the property before you leave the UK.

 

2. If the property is sold after you leave the UK, tax could be payable in both countries, albeit Australia will allow a credit for any UK tax paid.

[Marisawright]

47 minutes ago, DIG85 said:

 

 

2. If the property is sold after you leave the UK, tax could be payable in both countries, albeit Australia will allow a credit for any UK tax paid.

Are you sure? On what grounds and what kind of tax?

[DIG85]

5 minutes ago, Marisawright said:

Are you sure? On what grounds and what kind of tax?

UK CGT now applies to non-residents on the disposal of UK residential property. Principal private residence (PPR) relief no longer necessarily covers periods spent living outside the UK.

Australian CGT could apply on the basis that Australian residents are charged on disposal of their worldwide assets. Aus CGT should only apply if the property is sold more than 6 years after leaving the UK.

[Marisawright]

1 hour ago, DIG85 said:

UK CGT now applies to non-residents on the disposal of UK residential property. Principal private residence (PPR) relief no longer necessarily covers periods spent living outside the UK.

Ooh, that could catch a few people out.  

I thought you were referring to selling shortly after moving to Australia, in which case Australian CGT wouldn't apply because they can continue to claim it as their principal residence until they buy a home in Australia (for up to 6 years).  

[Marisawright]

11 hours ago, fusela said:

 When the fixed rate mortgage ends - transition to a Buy to Let Mortgage.

• I see from the board that re-mortgaging in the future is difficult
• What are the implications of sellng in the future?
• Where would tax be payablel in the furture?  The UK, Australia or both?

You may not get a Buy to Let Mortgage if you reveal that you're going overseas.  

You are right, it's almost impossible to re-mortgage once you are resident overseas.  There are mortgages for expats, but the rates are prohibitive.  So if you keep the property, you need a long-term mortgage, OR you need to sell it before the mortgage needs renewing.

If you decide to let it out, you'll pay tax on the income in the UK and you'll have to submit a UK tax return for that.   Then when you do your Australian tax return, you'll declare the income there too, but you'll also declare the tax you paid in the UK and they'll take that into account.  So you don't pay double tax. 

What you can claim as expenses differs between the UK and Australia.  In Australia, you can lower your tax bill by claiming depreciation, but to claim that, you'll need a depreciation report before you let the place out. They're not easy to get in the UK because most valuers don't know what they are, but I believe @Alan Collett knows someone who does them.

You should also get the place valued before you let it out, because that will be your base value for CGT.  You'll be assessed for CGT on the difference between that value and the value when you sell it.  

[kmrg]

You don't have to get a buy to let mortgage in order to rent the property out in the UK. 

When we moved to Australia we weren't able to sell our house, so just requested permission to rent it out from our mortgage provider. When the fixed term rate was coming to an end I was able to just start a new fixed term option through my online banking. We are still renting it out and on the same mortgage 4.5 years later. 

Completing the UK tax return and then being taxed in Australia on the income is a bit of a pain, but you get used to doing and is rarely easy as the income is usually the same each year. We don't actually pay any tax on it in the UK as the income is under the threshold.

Good option if you are not 100% sure on buying in Australia or if you can't sell your house. 

Edited January 19, 2022 by kmrg

[fusela]

Thank-you all for your input.

As there are a lot of differing views, I'll get some professional advice. I have the time and want to make sure that I get this right!

 

[Marisawright]

2 minutes ago, fusela said:

Thank-you all for your input.

As there are a lot of differing views, I'll get some professional advice. I have the time and want to make sure that I get this right!

 

Actually everyone agrees. To summarise what everyone has said:

I said you probably won't get a Buy to Let mortgage, but it's possible you won't need one.  However, although @kmrg got approval to rent out their home with an ordinary mortgage, others have been refused - so if you're going to do it, make sure you get permission BEFORE you leave the UK, so you've got time to change your plans if necessary.

As for tax:  @DIG85 and I have said the same thing. If you sell your home before you leave the UK, you will not be liable for any tax on the proceeds in either country.  

If you hold onto your property for any length of time, there may be CGT payable to the British taxman.   There won't be any CGT payable to the Australian taxman for 6 years, provided you're just renting in Australia.  Once you buy a home in Australia, you'll start to be liable for CGT but not for the whole amount.  However, do remember that the only reason you'll pay CGT is if you're making a profit, and if you're making a profit, you can afford to lose a bit of it in tax - you'll still be in front.

If you are going to rent out your property, then I do recommend using a good tax agent who knows the tax law in both countries (I've mentioned Alan), because it is fiddly.  Once you've seen how they do it, you can decide whether you want to DIY or go on using them, but if you do decide to DIY, you can have more confidence that you're doing it right.

[fusela]

2 hours ago, Marisawright said:

Actually everyone agrees. To summarise what everyone has said:

I said you probably won't get a Buy to Let mortgage, but it's possible you won't need one.  However, although @kmrg got approval to rent out their home with an ordinary mortgage, others have been refused - so if you're going to do it, make sure you get permission BEFORE you leave the UK, so you've got time to change your plans if necessary.

As for tax:  @DIG85 and I have said the same thing. If you sell your home before you leave the UK, you will not be liable for any tax on the proceeds in either country.  

If you hold onto your property for any length of time, there may be CGT payable to the British taxman.   There won't be any CGT payable to the Australian taxman for 6 years, provided you're just renting in Australia.  Once you buy a home in Australia, you'll start to be liable for CGT but not for the whole amount.  However, do remember that the only reason you'll pay CGT is if you're making a profit, and if you're making a profit, you can afford to lose a bit of it in tax - you'll still be in front.

If you are going to rent out your property, then I do recommend using a good tax agent who knows the tax law in both countries (I've mentioned Alan), because it is fiddly.  Once you've seen how they do it, you can decide whether you want to DIY or go on using them, but if you do decide to DIY, you can have more confidence that you're doing it right.

Many Thanks,

I agree that you I can get consent to let with my mortgage provivder, however it's only valid for a year or two, and then I'll be breaching the T&C's of the mortgage.  If it's longer term.

I'm more worried about the tax implications and will reach out to Alan for more clarity...

Thanks for your input - I'm probably worrying too much but I need to get these things right in my head.  The last thing I want is to me liable for CGT in both countries - while I think I understand the situation, I need ensure I've got all the facts before I make a decision.

-fusela