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moving abroad and renting out house

moving abroad and renting out house

I'm thinking of moving abroad and am considering renting out my house. But I have three questions.

1. Will I have to pay tax on any rental income or would this be covered by my personal allowance in this country?

2. Under the concept of double taxation if I elect to be resident abroad would I lose the personal allowances on any UK taxable income or tax shelters such as ISA's. i.e. I would have to declare all my income under the tax regime of my resident country.

3. If I sold my house in a year's time after renting out, would I be liable for CGT on the profit after paying off the mortgage?

Many Thanks Dave
dave

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By admin
21st Feb 2001 21:21

You may still qualify for personal allowances
I agree with Jane re IT and CGT.
U R entitled to PA's even if non resident if U R a Commonwealth citzen or EEA national.
Residence = approx 183 days or more in UK in tax year (other rules re visits but this is the basic rule). Year may be split, by concession, if U leave to live abroad for at least 3 years.
Mircea's comments re CGT may quite possibly be applicable but the situation seems more likely to be covered by Janes' comments if it is your main residence and U wish 2 sell after 1 year. Gain would , in simple terms be price less cost ignoring mortgage repayment.
The only impact of your mortgage would be interest is likely to be allowable against your rental income.

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By admin
21st Feb 2001 13:09

Non resident landlords scheme
Can I also add that your tenants or your letting agent if you use one will have to withhold tax from your rent unless you register under the non resident landlords' scheme. Inland Revenue FICO in Nottingham ( look on the Revenue website - it is quite good on this) will give you more information.
On the CGT side, very briefly, to the extent that during the period of ownership it was your only or main residence ( and for the last 36 months prior to sale) the gain is exempt. The proportions are usually worked out on a time basis. So if you sell it after a year and it has always been your only or main residence apart from letting it out that year, you will have no CGT to pay. On top of this there is a further exemption for letting your only or main residence to the extent of the lesser of the gain otherwise chargeable or £40,000.

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avatar
21st Feb 2001 00:14

I'll give this a try
1. You will be liable to Income Tax on any rental income from UK property according to the rules for Schedule A.

2. You cannot elect to be resident abroad: residence is an objective fact, either you are or you are not resident in a certain country. If you become resident in a foreign country, then you will normally have to declare your worldwide income (including UK income) to the tax authorities of that country. The concept of double taxation avoidance is about obtaining relief for any tax paid abroad on income that is also taxable in your country of residence. The relief is normally equal to the lower of the foreign tax paid and the tax liability in your country of residence.

If you are no longer a UK resident, you will indeed lose your tax allowances and the right to use tax effective savings plans such as ISAs.

3. If you remain a foreign resident for more than 5 tax years after the disposal, you will no longer be liable to CGT on the gain. If you return to the UK earlier, CGT on the gain will be due upon your return.

I really hope I got this right. If not, please correct me! :-)

Mircea Lazar
[email protected]

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