tax on uk property

hello

could someone give me advice as to how much tax  I would pay on £1000 rent on a uk property if I moved to spain and became a a resident.

thanks

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Ask HMRC as you must declare the rental income in the UK

 

However, Kathyslad  insists that it must also be reported in Spain, relying on this and similar info:

 

 

If the property has already been taxed in the country where it is situated and this tax is more than the tax you would pay in Spain, it has in the past been common to leave it off your Spanish tax return, as no tax would be due. The has been the traditional approach for UK property, due to the complications introduced by the different tax year ends in the UK and Spain.

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maybe it has ben common in the past but its also been common not to report anything for some people

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 As Johnzx says, you must declare it in the UK, and also in Spain, although you can claim an allowance for any UK tax paid. If the UK tax is more than you would pay in Spain, then you won't pay any more, if its less, then you will just pay the difference. How much you wil pay (in either country) will depend upon your personal circumstances. The information you have provided is not very helpful, as it doesn't say whether its weekly, monthly or per year, and whether its the gross or net figure. 

When you rent out a property in either country, you can deduct allowable expenses. This page sets out these details in a simple, easy to read format. Once you have arrived at the net figure, then that is the taxable amount. How much you will pay will depend upon whether you have other income taxable in the UK. From April 2013 the personal allowance is £9,105, so for example, if you have other income of say £10,000 then you will pay tax on the full net amount of rental income. If its £5,000, then you can deduct the difference £4,105 from the rental income, and you wil pay tax on the balance left. At these levels, the tax rate is 20% in the UK .

The deductions allowed for expenses are similar in Spain, but tax is more generous, as you are only taxed on 50% of the net rental income. The tax calculation is similar, but the personal allowances are variable, depending upon whether you have earned income, and are submitting a single or joint (with your partner) return.

Whether you wil need to pay any additional tax in Spain will depend upon how you are using your allowances in either country.

 

 

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 Muriel

If you are using a letting agent you would need to obtain a NRL1 form from HMRC and give it to the agent, this would enable them to pay you your rent in full without deduction.

So you are getting £12,000 income

You can set off the following if they are applicable to you.

Mortgage Interest, agents fees, repairs and renewals and service charges.

You then file a tax return by 31st Jan each year for the period to the previous April, if you have no other income, and depending how much you can 'set off', it is likely that when your personal allowance (£7475 - 2011) is deployed that you will pay little or no tax.

A small self employed tax accountant should do this for you for around £60 + vat, I believe you can set this cost off as well

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KathysLad

Crossed post, I didn't see yours prior to posting, some duplicate information.

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Mungry said


"maybe it has ben common in the past but its also been common not to report anything for some people"

Not sure I understand this post

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there is no quote on this forum software which is unusual.

quote johnx

Ask HMRC as you must declare the rental income in the UK

 

However, Kathyslad  insists that it must also be reported in Spain, relying on this and similar info:

 

 

If the property has already been taxed in the country where it is situated and this tax is more than the tax you would pay in Spain, it has in the past been common to leave it off your Spanish tax return, as no tax would be due. The has been the traditional approach for UK property, due to the complications introduced by the different tax year ends in the UK and Spain.

_______________________

Please send me a private message if you do not agree with what I have said

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Hi,

If you are tax resident in Spain you should declare the income in Spain as part of your Spanish tax declaration.

If you own a UK based limited company and your property forms part of this you declare the income in the UK as part of your company's accounts.

 

Annie

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and they are very keen now.

when people talk about how `the government is goign after people`

i personally know some people whom  have been hit for not declaring.

they are now having to  buy apartments in gibraltar and spend most of the year there

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Thanks for the replies,

I have now paid off my mortgage on my UK home it would rent out for £1000 a month,so i thought I would go to live in my spanish house which also has no mortgage .  I would have no other income only this money so if there was to much tax to pay I would not be able to live on that amount as I would not work in spain. I am single with no dependants .

thanks 

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Ignore the current tax year as it's probably complex if you've been working as well. Say you started renting it out in the new UK tax year, from April 6th. The tax-free allowance goes up for 2013/14 to £9,440. So from you £12k rental income, deduct all expenses including agent's fee, then you have an additional allowance of 10% of gross rent (so another £1200), and all that should take your net rental income down to somewhere between £9k and £10k. You will pay tax at 20% of the amount OVER your tax-free allowance of £9,440. So if any it will be one or two hundred pounds to pay only, assuming you have no other UK income. Don't forget you have to declare interest earned on any savings.

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 Ignore the current tax year as it's probably complex if you've been working as well. Say you started renting it out in the new UK tax year, from April 6th. The tax-free allowance goes up for 2013/14 to £9,440. So from you £12k rental income, deduct all expenses including agent's fee, then you have an additional allowance of 10% of gross rent (so another £1200), and all that should take your net rental income down to somewhere between £9k and £10k. You will pay tax at 20% of the amount OVER your tax-free allowance of £9,440. So if any it will be one or two hundred pounds to pay only, assuming you have no other UK income. Don't forget you have to declare interest earned on any savings.

In general I agree with this post. However, couple of points. If muriel has no other income I think its reasonable to assume that she doesn't receive a state pension, so is not over 65. In which case the allowance is £9,205 (I made a typo the the other day). £9,440 is when you are over 65. In addition, the 10% allowance is only available if you rent your property furnished. 

In terms of additional tax payable in Spain, then if you have no other income, there won't be any. As I posted before, tax is payable on 50% of your net rental income, plus, in addition, you can claim a depreciation allowance of 3% (don't think this has been changed, but you should check). The depreciation is only on the building though, not the land, and is on the cost price, not the value. So for a UK property I guess you would have to find out the rebuild costs in the year you purchased. e.g If your property is 800 sq feet, and the rebuild costs were £100 a sq foot, the value would be £80,000, and yourdepreciation would be £2,400. This is deducted from the gross income with your other expenses.

So, after deducting other expenses, if the balance is £10,000, the tax payable in the UK (unfurnished, and assuming you're under 65) would be £159. (£10,000 - £9205 = £795 x 20%). For Spain, the £2,400 would be deducted from the £10,000, so the net rental income would be £7,600, and tax payable on 50% i.e £3800. Converted to euros at €1.20 this is €4,560. your personal allowance is €5,151, so no additional tax is payable.

HOWEVER, if, and when you qualify for a state pension, then this is taxable in Spain. From April the basic is £110 a week, so approx €6,920. Added to your net rental income, your taxable income then becomes €11,480, but you get an additional €4,080 earned income allowance. The personal allowance when you're 65 goes upto €6,069 plus €4,080 ,but note you may qualify for your pension before you are 65, so your allowance would be €5,151 plus €4,080

So, if you are 65, the tax payable in spain would be €330 less what you paid in the UK - over 65 this would be £112 or about €135, so you would have to pay an additional €195. Under 65 it would €365

If you do rent it out furnished, then you wouldn't pay any tax in the UK, but this allowance is not available in Spain, you would just claim for any renewal costs. You can opt to claim for renewals in the UK, but I don't think you can chop and change, so you should think about claiming for renewals in the Uk, otherwise when you draw your state pension it could end up costing you money

Hope this makes sesnse, and not to complicated to understand, although I have tried to set it out clearly.

 

This message was last edited by KathysLad on 16/01/2013.

This message was last edited by KathysLad on 16/01/2013.

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No, according to the HMRC website the tax-free personal allowance 2013/14 is £9,440 for people born AFTER 5th April 1948. ie under 65.

Don't forget that the allowance was increased in the November budget statement, above what had been announced, so when googling this figure many accountancy firms still have the old rates in newsletters, articles etc, written before the most recent increase.

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Sorry, I also meant to say that the post above KathysLad's post, which is uncredited to a real live person, was mine. Don't know why or how I managed to be secret! Anyway, any errors are mine :-)

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Tamara

You are absolutely right, and I am wrong. My fault, I was reading the original HMRC memo, and I looked at that page and read it as before not after. Apologies.

Muriel, it makes a reduction of

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 Sorry, I was going to post the changes to the figures I posted, but for some reason I can't edit when I post on my ipad.

 

Anyway, under 65 tax payable would be £112, not £159. Over 65 it would be nil.

spanish calculations are correct, so net payable would be 

under 65 and not drawing pension  would still be zero additional. Under 65 and drawing pension would be €230. Over 65 and drawing pension it would be €330

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Muriel, I don't know how to find old threads on this forum, but there was a really interesting thread on how much it costs to live here. General view was that €1000 was more than enough, and your £1000 is (currently!) more like €1200. For people without rent or mortgages to pay, €600-800 seemed to be More than enough. Obviously the rent / mortage is most peope's biggest expense. Wthout that, and running a small car, flying to the UK a few times a year, not being too stingy with water and electric, going out a couple of times a week and eating quite well, was perfectly doable on well under €1000 pm.

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Hi,

It all depends on your over all income for the fiscal year.

Annie

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Tamara

On the right, above the orange line, select search forums. I tried cost of living, and a number of threads came up. One called monthly living seems to contain quite a lot of information.

Muriel will probably have £850ish after rental expenses, which should just be about enough. However, one point to bear in mind is the new rules regarding the registraion on the register of foreigners (green certificate), is that you need to demonstrate minimum amount of income (which she can), plus health care cover, which unless she qualifies for the S1 under Ni contibutions, will mean she needs priavte health care. Much cheaper in Spain, but still a big cost, if you're not on a big income.

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