If you own a holiday home overseas and you’re not declaring your income from it, you could be liable for an investigation from HMRC. Here’s what you need to know.
There’s been a considerable rise in overseas property income declared in the last few years. In 2017-18 for example, declared income was up 17% from the year before, following a series of tax investigation campaigns from HMRC. If you own property overseas and you rent it out, you need to be declaring your income to HMRC so that it can be properly taxed.
The Rules On Overseas Property Income
If you’re a UK resident, you need to pay UK Income Tax on foreign income, including rental income on property overseas (except for the first £1,000 which is exempt from Income Tax).
What To Do If You Live Abroad
If you’re a UK resident whose permanent residence is outside of the UK, you may not have to pay UK Income Tax on any property rentals. Whether or not you have to pay will depend on how much you’re earning and the bank account you’re using. So if you’re earning less than £2,000 per tax year and you do not bring your income into the UK (e.g. by transferring the funds into a UK bank account) then you won’t have to pay UK Income Tax. See the related HMRC page for more specific guidance if you live outside of the UK yourself, or get in touch with your Warr & Co accountant.
What To Do If You Haven’t Declared Your Income
Penalties can be up to 200% of the tax that HMRC believe is owed, so we strongly recommend that you voluntarily declare any previously undisclosed income.
The best thing to do is to let HMRC know of any previously undeclared income from overseas rentals. Once you’ve made a disclosure, you’ll have 90 days to work out what you owe and pay the correct amount.
How To Work Out What You Owe
There are lots of links on the Let Property Campaign website to help you calculate what tax (if any) you owe, including checklists, videos and a tax calculator.
However it can still feel very overwhelming, so to avoid errors and confusion please do get in touch with Warr & Co. We’ve been specialist landlord and property accountants for decades, so we are expertly placed to provide you with all the information you need, saving you time and worry.
Even though declaring your income now won’t give you immunity from any penalties, HMRC say that they will be more lenient on those who have made a declaration – so it’s well worth making sure that you’re doing the right thing when it comes to Income Tax.
© 2019 Warr & Co Chartered Accountants. Warr & Co Chartered Accountants is a member of The Institute of Chartered Accountants in England & Wales (ICAEW). Whilst the information detailed here is updated regularly to ensure it remains factually correct, it does not in any way constitute specific advice and no responsibility shall be accepted for any actions taken directly as a consequence of reading it. If you would like to discuss any of the points raised and / or engage our services in providing advice specific to your personal circumstances, please feel free to contact any one of the partners on 0161 477 6789 or contact us via our website forms. Warr & Co Chartered Accountants are registered to carry our audit work in the UK, our audit registration number is C002961684, for more information please visit www.auditregister.org.uk.