UK expats to pay tax on their rented houses back home

[shoppeacenquiet]

Sell and purchase a different property

[icare999]

Be careful about selling and repurchasing any property you may own in the UK as there is likely to be a time limit in which this will be treated as being tax avoidance and therefore not allowed. In that event the Inland Revenue would treat the original purchase price (after allowing for any improvements) to be the purchase price for capital gains tax purposes rather than the new, higher, purchase price.

When the acquisition price of an asset for capital gains tax was index-linked some 30+ years ago, you could elect (for all assets) to have the value for capital gains tax to be either the original purchase price or the value as at a certain date (6th April 1981 if my memory is correct). When indexation was subsequently removed, I think you were allowed to make a further election but my memory is a bit vague on that.

I suspect therefore that if the exemption from capital gains tax is removed for non-resident tax payers, there will be a similar option to elect for either the original purchase price or the value as at a specific date - perhaps 6th April 2015?

Alan

nonsense its perfectly legal and is tax planning. In any case i actually phoned and asked tax people person i spoke to as usual was some kid who knew nothing at all and put me on to someone else who stated it should prove no problem.

Many many ways to skin a cat you know.

If it ever came to it and it got to silly wed just sell all and not pay. They are hardly likely to pursue my Thai wife are they since we dont live in UK.

But might be better just sell it all and forget UK for investment purposes.

just because your paranoid does not mean they aren't out to get you.

Your idea they will give a choice is based on total misunderstanding of CGT rules over last 20 years. Ive been doing property in UK for over 60 years and in that time bought at least 80 + properties. When they removed indexation their was no such option since argument went they reduced CGT rate to account for it from 40% (long before it was 30%) to 18 or 28% depending on weather it put you into higher tax band or not. Taking away indexation was a very clever move since it effectively increased the CGT tax for a lot of people over long term.

[icare999]

Icare999 has the most sensible thinking.

These steps are just the beginning.

Think about the precedent being set for all these tax rises. This by a conservative government. How you think labour will get stuck in if they win the next election. They already basically declared they will declare war on landlords.

your 100% right if labour win and even if they doth 90% sure first they will remove mortgage relief on loans for buy to let and then introduce (as was case in 70%) introduce a investment income surcharge (then it was 15% hence in 70's top rate was 98%, I know thats hard to believe but check it out).

of course landlords are an easy target hated by most due to envy but I have to agree its contributed greatly to ridiculous high house prices in UK. Whats contributed most is housing benefit which means some can let pout total crap housing for very high rents. If you look at buy to let let to those on housing benefit mist not all are very very sub standard and then compare with that let on proper open market you will see rents in sector only letting to non DHSS are not much higher but far far better.

Their is a reason yields on property let to those on housing benefit is often 8% or much better while yields on decent good quality housing let to non housing benefit tenants is only 4% or so . I know because I've been in property ten tales for 60+ years and while we nay let to non DHSS I know many who think were mad since their yields are double or more but they do admit quality of their housing is rubbish and often their tenants are very bad so they argue why give good decent housing for people who will just abuse it.

Sorry off topic a bit but these new tax changes and ones to come are only going to drive good landlords away. These only hit ex pats but next lot will hit all landlords and just hit ex pats harder.

[hugh2121]

Do not forget you should be able to offset this against the tax you pay in Thailand under the double taxation agreements.

Seems the chancellor at last is cracking down on tax dodgers, not just the big ones like Starbucks and Amazon.

Only if you have a taxable income in Thailand

[hugh2121]

https://www.gov.uk/government/consultat ... -allowance Para 6.6 covers pensioners

https://www.gov.uk/government/consultat ... -residents

Thanks for the link Taff. Long winded but very clear which the newspaper and magazine articles are not.

[hugh2121]

I know quite a few people living here on retirement extensions who survive on a combination of State pension plus a Company Pension.

No rental income involved.

These people already pay UK tax, I guess because the pensions are paid in the UK and the sum total exceeds the annual allowance.

I am reading that the said allowance could become zero for those out of the UK more than 6 months, certainly nearly all those I know.

A potential loss of £40 pw or £170 a month for a single person.

Some are struggling now.

Am I getting anything wrong here?

I think you are reading the headline news, as I did, which is incomplete. Expattaf has posted a link to gov.uk which gives the full proposals. As I read it, if your income is all UK generated, pensions rentals etc. and you pay UK tax on all the income, your personal allowance is safe.

[ThaiPauly]

I have read the links, now I want to see if I have grasped the implications.

If I sell the two properties I rent out in the UK before 5 April 2015 I will pay no CGT? ( I have been out of the UK 10 years)

If I do not sell them then I will not only be liable for CGT when and if I do, but also I will be taxed at 20% as my personal allowance will have gone from 10,000 pa to NIL

Have I got this right?

[Ricardo]

Any income over your basic allowance is taxable in the UK at 20%,at least , end of story , what's new ?

The fact that non-residents' personal-allowance will be reduced to zero ?

[shoppeacenquiet]

Icare999 has the most sensible thinking.

These steps are just the beginning.

Think about the precedent being set for all these tax rises. This by a conservative government. How you think labour will get stuck in if they win the next election. They already basically declared they will declare war on landlords.

your 100% right if labour win and even if they doth 90% sure first they will remove mortgage relief on loans for buy to let and then introduce (as was case in 70%) introduce a investment income surcharge (then it was 15% hence in 70's top rate was 98%, I know thats hard to believe but check it out).

of course landlords are an easy target hated by most due to envy but I have to agree its contributed greatly to ridiculous high house prices in UK. Whats contributed most is housing benefit which means some can let pout total crap housing for very high rents. If you look at buy to let let to those on housing benefit mist not all are very very sub standard and then compare with that let on proper open market you will see rents in sector only letting to non DHSS are not much higher but far far better.

Their is a reason yields on property let to those on housing benefit is often 8% or much better while yields on decent good quality housing let to non housing benefit tenants is only 4% or so . I know because I've been in property ten tales for 60+ years and while we nay let to non DHSS I know many who think were mad since their yields are double or more but they do admit quality of their housing is rubbish and often their tenants are very bad so they argue why give good decent housing for people who will just abuse it.

Sorry off topic a bit but these new tax changes and ones to come are only going to drive good landlords away. These only hit ex pats but next lot will hit all landlords and just hit ex pats harder.

The trust is housing benefits tenants are a greater risk category, non payment, damages, nuisance etc etc , so the market rightly dictates a higher rate of return for the higher risk. Same like a US bond or a Greek bond, just the market and fair enough to the land lords.

Personally I think housing benefit should be scrapped so all tenants are equal and more likely to respect the properties and want to keep their housing. They tried to get the universal credit to do away with the housing/ ie one cash payment monthly which recipients need to manage to pay what ever costs, housing, food, bills etc. shame the liberals scupperd it. That would have made the market more sensible, freeing up property in central cities where workers need it and naturally the work shy move out to the cheaper / less useful housing areas. That would be a better free market solution in action. The government interventions is what is causing all the problems, benefits filling the cities with non working people, limited housing because of too struck planning and regulation, over zealous council regulations on sizes and facilities required for HMOs etc. not the land lords fault for any of this.

[Eneukman]

Sell and purchase a different property

Perfectly acceptable.

Alan

[Eneukman]

I have read the links, now I want to see if I have grasped the implications.

If I sell the two properties I rent out in the UK before 5 April 2015 I will pay no CGT? ( I have been out of the UK 10 years)

If I do not sell them then I will not only be liable for CGT when and if I do, but also I will be taxed at 20% as my personal allowance will have gone from 10,000 pa to NIL

Have I got this right?

If you sell before 5th April 2015 there would, unless the rules have changed since I moved over here, be no CGT liability unless you were to become resident in the UK within 5 full tax years of claiming non-residence status.

I think the rates you are using were replaced a few years ago. I think the rates are 18% or 28%, with the higher rate applying if the gains when added to your UK income take the total above the level at which income tax is charged at 40%.

Alan

[Eneukman]

Be careful about selling and repurchasing any property you may own in the UK as there is likely to be a time limit in which this will be treated as being tax avoidance and therefore not allowed. In that event the Inland Revenue would treat the original purchase price (after allowing for any improvements) to be the purchase price for capital gains tax purposes rather than the new, higher, purchase price.

When the acquisition price of an asset for capital gains tax was index-linked some 30+ years ago, you could elect (for all assets) to have the value for capital gains tax to be either the original purchase price or the value as at a certain date (6th April 1981 if my memory is correct). When indexation was subsequently removed, I think you were allowed to make a further election but my memory is a bit vague on that.

I suspect therefore that if the exemption from capital gains tax is removed for non-resident tax payers, there will be a similar option to elect for either the original purchase price or the value as at a specific date - perhaps 6th April 2015?

Alan

nonsense its perfectly legal and is tax planning. In any case i actually phoned and asked tax people person i spoke to as usual was some kid who knew nothing at all and put me on to someone else who stated it should prove no problem.

Many many ways to skin a cat you know.

If it ever came to it and it got to silly wed just sell all and not pay. They are hardly likely to pursue my Thai wife are they since we dont live in UK.

But might be better just sell it all and forget UK for investment purposes.

just because your paranoid does not mean they aren't out to get you.

Your idea they will give a choice is based on total misunderstanding of CGT rules over last 20 years. Ive been doing property in UK for over 60 years and in that time bought at least 80 + properties. When they removed indexation their was no such option since argument went they reduced CGT rate to account for it from 40% (long before it was 30%) to 18 or 28% depending on weather it put you into higher tax band or not. Taking away indexation was a very clever move since it effectively increased the CGT tax for a lot of people over long term.

I can't speak about buying and selling houses but when I first started working for the Bank of Scotland 40 + years ago, we would sell and then immediately buy back the same stock exchange investment to realise a gain fot capital gains tax purposes. That was outlawed so we started selling on day one and then buying back the same investment the following day. That too has been outlawed and I find it hard to believe that the same rule doesn't apply to the buying and selling of house

I accept that I was wrong about an option being available when indexation was done away with.

I latterly spent 25 years in a specialist department and on more than one occasion, I had to tell a solicitor (politely) that he was talking <deleted>.

Forgetting about investing in the UK is an option but I'm not sure whether or not I can take my pension fund from the Bank of Scotland and invest it elsewhere and even if I could I'm not sure exactly where would be the best option. If I had to leave my pension where it was then it would make no difference to me whatsoever if I retained my UK investment portfolio.

Alan

[GavinK]

Isn't there another sting here regarding the 10% starting rate for savings income (e.g. bank interest) ? If your earnings less your personal allowance is greater than the 10% band then no 10% band applies, so if there is no personal allowance and your earnings (including bank interest) are greater than GBP 2,880 then it's goodbye to the 10% rate also...

[Bazle]

I know quite a few people living here on retirement extensions who survive on a combination of State pension plus a Company Pension.

No rental income involved.

These people already pay UK tax, I guess because the pensions are paid in the UK and the sum total exceeds the annual allowance.

I am reading that the said allowance could become zero for those out of the UK more than 6 months, certainly nearly all those I know.

A potential loss of £40 pw or £170 a month for a single person.

Some are struggling now.

Am I getting anything wrong here?

As I read it, if your income is all UK generated, pensions rentals etc. and you pay UK tax on all the income, your personal allowance is safe.

You can't assume that at this stage. They are looking at various options - the most extreme being simply to not allow PAs to non-UK residents.

Furthermore, I am concerned about what they say at 6.6 (and I've written to them about it):

"If the government were to restrict non-residents entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK."

My understanding of Thai tax is that both UK pension and UK rental income are taxable in Thailand, with the amount taxed being measured by the amount taken in (remitted) to Thailand. If the wording quoted above were to be taken at face value, there is a problem.

[GavinK]

Therefore the only way in which I could retain the personal allowance would be to sell my property in the UK

Or....if you have a spouse with no overseas income that would be taxable in the UK and is entitled to reside in the UK and is someone you trust...transfer the ownership of the property into the name of said spouse and don't claim that she is non-resident when you complete the UK tax return (or use the statutory residence rules for her to be deemed UK resident) so as least one of you can use the personal allowance. Of course there are IHT issues to consider.

Thinking again about this, if said spouse's only income was from UK property rental, then she could stay non-resident and still get the full personal allowance since she would be deemed to have strong economic ties to the UK. Same for any kids over 18 years old that you might want to transfer ownership to...

[Bazle]

Thinking again about this, if said spouse's only income was from UK property rental, then she could stay non-resident and still get the full personal allowance since she would be deemed to have strong economic ties to the UK.

Here you are making the assumption that they will go down the "percentage test" route as set out in para 5.2. That is just one of their options.

And if your wife is Thai, you'd need to look into Thai tax.

Edited August 18, 2014 by Bazle

[GavinK]

Thinking again about this, if said spouse's only income was from UK property rental, then she could stay non-resident and still get the full personal allowance since she would be deemed to have strong economic ties to the UK.

Here you are making the assumption that they will go down the "percentage test" route as set out in para 5.2. That is just one of their options.

And if your wife is Thai, you'd need to look into Thai tax.

Yes, but a valid route if they take that option ?

[Bazle]

Yes, but a valid route if they take that option ?

Lots to consider - (possibly) Thai tax, Stamp Duty, the IHT positions of you are your wife, (possibly) the mortgage situation.

[icare999]

I have read the links, now I want to see if I have grasped the implications.

If I sell the two properties I rent out in the UK before 5 April 2015 I will pay no CGT? ( I have been out of the UK 10 years)

If I do not sell them then I will not only be liable for CGT when and if I do, but also I will be taxed at 20% as my personal allowance will have gone from 10,000 pa to NIL

Have I got this right?

If you sell before 5th April 2015 there would, unless the rules have changed since I moved over here, be no CGT liability unless you were to become resident in the UK within 5 full tax years of claiming non-residence status.

I think the rates you are using were replaced a few years ago. I think the rates are 18% or 28%, with the higher rate applying if the gains when added to your UK income take the total above the level at which income tax is charged at 40%.

Alan

totally correct Ive had property in UK for last 60 years and have kept fully up to date with rules. Most people will of course pay at 28% since when theirs no indexation anymore and its added to your income and then if your in higher rate you pay 28%. Its simply theft IMO and when inflation does take off again as impure it will after 28% tax on gain I predict many will not even get back on selling what they paid plus inflation.

only good thing is at moment when you go any property you leave is revalued at current values and theirs no CGT tax on death. This is very useful if you only have a small property portfolio (less than IH tax threshold).

But it probably wont be long before they catch on and say on death CGT is payable and then IH tax.

Ive been very careful to get my estate in UK below IH threshold and put some UK property in my This wifes name and our children's but i could see all this coming so sold most and got money out of UK while I could and then gave it to my wife and kids.

Im seriously considering just selling all up in UK my small bit my wives and our kids and simply putting it somewhere offshore with very low tax and no property tax or IH tax. Thailand at moment does not have CGT or IH tax but i believe their are discussions to introduce property and IH tax here,. Their is some very negligible land tax on more than 3 Rai but its peanuts (in our case a thousand a year on around 100 rai)

[icare999]

Be careful about selling and repurchasing any property you may own in the UK as there is likely to be a time limit in which this will be treated as being tax avoidance and therefore not allowed. In that event the Inland Revenue would treat the original purchase price (after allowing for any improvements) to be the purchase price for capital gains tax purposes rather than the new, higher, purchase price.

When the acquisition price of an asset for capital gains tax was index-linked some 30+ years ago, you could elect (for all assets) to have the value for capital gains tax to be either the original purchase price or the value as at a certain date (6th April 1981 if my memory is correct). When indexation was subsequently removed, I think you were allowed to make a further election but my memory is a bit vague on that.

I suspect therefore that if the exemption from capital gains tax is removed for non-resident tax payers, there will be a similar option to elect for either the original purchase price or the value as at a specific date - perhaps 6th April 2015?

Alan

nonsense its perfectly legal and is tax planning. In any case i actually phoned and asked tax people person i spoke to as usual was some kid who knew nothing at all and put me on to someone else who stated it should prove no problem.

Many many ways to skin a cat you know.

If it ever came to it and it got to silly wed just sell all and not pay. They are hardly likely to pursue my Thai wife are they since we dont live in UK.

But might be better just sell it all and forget UK for investment purposes.

just because your paranoid does not mean they aren't out to get you.

Your idea they will give a choice is based on total misunderstanding of CGT rules over last 20 years. Ive been doing property in UK for over 60 years and in that time bought at least 80 + properties. When they removed indexation their was no such option since argument went they reduced CGT rate to account for it from 40% (long before it was 30%) to 18 or 28% depending on weather it put you into higher tax band or not. Taking away indexation was a very clever move since it effectively increased the CGT tax for a lot of people over long term.

I can't speak about buying and selling houses but when I first started working for the Bank of Scotland 40 + years ago, we would sell and then immediately buy back the same stock exchange investment to realise a gain fot capital gains tax purposes. That was outlawed so we started selling on day one and then buying back the same investment the following day. That too has been outlawed and I find it hard to believe that the same rule doesn't apply to the buying and selling of house

I accept that I was wrong about an option being available when indexation was done away with.

I latterly spent 25 years in a specialist department and on more than one occasion, I had to tell a solicitor (politely) that he was talking <deleted>.

Forgetting about investing in the UK is an option but I'm not sure whether or not I can take my pension fund from the Bank of Scotland and invest it elsewhere and even if I could I'm not sure exactly where would be the best option. If I had to leave my pension where it was then it would make no difference to me whatsoever if I retained my UK investment portfolio.

Alan

I'm fully aware of bead and breakfast for shares that used to occur but its different IMO as far as I know it was used for same shares. Selling one property and buying another is not same unless you sell say to a friend and then buy back from that friend. I did consider getting my wife to sell to me and then after APr next year id simply sell back to her but decided that while i believe legal might be subject to some form of clampdown but i doubt it particularly if few properties were involved and almost certainly not if it was only one. Selling some properties and then buying some different ones i doubt they would or could tax since one could argue you were only readjusting your portfolio particularly if you went from say low yield quality property to high yield low quality rentals or vice versa.

However I'm fed up with constantly having to be one step ahead of taxman in order to preserve for my wife and kids what I've sweated for all my life which is why I've over last 30 + years taken 75%+ of out wealth totally out of UK tax claws. Now i need to decide weather to just give up totally and advise my wife and kids to take out the rest. I probably reduce it further or rather get my wife and kids to reduce further and anyway future is in Asia not in west so perhaps its better.

re your pension fund ?? haven't the government said soon people will be able to withdraw their pension pot. Myself I've always said pensions are a waste of time and everyone should do their own since I was convinced and still am that one day government will steal those as well either directly or by inflation except of course our masters who ensure they have index linked pensions but IMO even those will be taken somehow.

[icare999]

Therefore the only way in which I could retain the personal allowance would be to sell my property in the UK

Or....if you have a spouse with no overseas income that would be taxable in the UK and is entitled to reside in the UK and is someone you trust...transfer the ownership of the property into the name of said spouse and don't claim that she is non-resident when you complete the UK tax return (or use the statutory residence rules for her to be deemed UK resident) so as least one of you can use the personal allowance. Of course there are IHT issues to consider.

Thinking again about this, if said spouse's only income was from UK property rental, then she could stay non-resident and still get the full personal allowance since she would be deemed to have strong economic ties to the UK. Same for any kids over 18 years old that you might want to transfer ownership to...

I'm sure thats not right my This wife gets no UK allowance because she's not a UK citizen and does not live in UK and as far as UK tax authorities are concerned her only income comes from rentals in UK. ?? where on earth dic you get that idea ??

[icare999]

Therefore the only way in which I could retain the personal allowance would be to sell my property in the UK

Or....if you have a spouse with no overseas income that would be taxable in the UK and is entitled to reside in the UK and is someone you trust...transfer the ownership of the property into the name of said spouse and don't claim that she is non-resident when you complete the UK tax return (or use the statutory residence rules for her to be deemed UK resident) so as least one of you can use the personal allowance. Of course there are IHT issues to consider.

Thinking again about this, if said spouse's only income was from UK property rental, then she could stay non-resident and still get the full personal allowance since she would be deemed to have strong economic ties to the UK. Same for any kids over 18 years old that you might want to transfer ownership to...

I'm sure thats not right my This wife gets no UK allowance because she's not a UK citizen and does not live in UK and as far as UK tax authorities are concerned her only income comes from rentals in UK. ?? where on earth dic you get that idea ??

sorry its just your interpretation of what might occur not what is. IMO its a very silly interpretation and id be amazed if they would accept that but as someone pointed pout even if they did ( no chance IMO) their are Thai tax implications.

[GavinK]

Never mentioned a Thai wife or Thai children... that's just your interpretation. Anyway, would be interesting to hear alternative ideas other than 'pay up' or 'sell-up'...

[cmsally]

Yet another example of why the govt can't be trusted with the tax payers money.

http://www.telegraph.co.uk/news/uknews/immigration/11041961/Taxpayer-hit-with-224m-bill-over-Theresa-Mays-decision-to-cancel-immigration-computer-system.html

[alfieconn]

I have read the links, now I want to see if I have grasped the implications.

If I sell the two properties I rent out in the UK before 5 April 2015 I will pay no CGT? ( I have been out of the UK 10 years)

If I do not sell them then I will not only be liable for CGT when and if I do, but also I will be taxed at 20% as my personal allowance will have gone from 10,000 pa to NIL

Have I got this right?

You will only be liable for CGT on any appreciation after April 2015.

The government recognises that this change is not straightforward to introduce. For this reason, the charge will apply from April 2015, and only to gains arising from that date. We will ensure, as far as possible, that the extended CGT charge is fair and sustainable, without imposing unnecessary or intrusive burdens on non-residents.

As for them withdrawing the personal allowance, this has not been decided yet on how and whom this is going to effect !

[Naam]

Do not forget you should be able to offset this against the tax you pay in Thailand under the double taxation agreements.

Seems the chancellor at last is cracking down on tax dodgers, not just the big ones like Starbucks and Amazon.

why would anybody pay tax in Thailand for rental income abroad?

[icare999]

I have read the links, now I want to see if I have grasped the implications.

If I sell the two properties I rent out in the UK before 5 April 2015 I will pay no CGT? ( I have been out of the UK 10 years)

If I do not sell them then I will not only be liable for CGT when and if I do, but also I will be taxed at 20% as my personal allowance will have gone from 10,000 pa to NIL

Have I got this right?

You will only be liable for CGT on any appreciation after April 2015.

The government recognises that this change is not straightforward to introduce. For this reason, the charge will apply from April 2015, and only to gains arising from that date. We will ensure, as far as possible, that the extended CGT charge is fair and sustainable, without imposing unnecessary or intrusive burdens on non-residents.

As for them withdrawing the personal allowance, this has not been decided yet on how and whom this is going to effect !

maybe maybe not details have not been real eased yet its very open to interpretation form that date could easily just mean only for property sold after that date and does not necessarily mean only gains from that date. Its a very dangerous assumption to make that your interpretation is one which will be used.

anyway i prefer safe than sorry and my this wife has already sold 2 of her UK properties even at low price id prefer to have bird in hand than 2 in bush. One she has in London she bought for 5000 pounds in 1976 and sold last year (when this was proposed) for 235,000 and recently resold for 325,000. Market is crazy in London and soon only billionaires ail lbw able to buy decent housing in London or foreigners. Crazy prises in London have been largely due to foreign buyers but this change may put a swift stop to that. Anyway IMO its a total bubble and as I said better bird in hand than 2 in bush.

[rayongchelsea]

It will 100% based on value once the rule is in place. Gains will be from April 2015, tax legislation is not implemented retrospectively.

[icare999]

It will 100% based on value once the rule is in place. Gains will be from April 2015, tax legislation is not implemented retrospectively.

well obviously you know better tunas me after all I've been doing property for only 60+ years and gone through numerous tax changes so what do i know

Well see but your totally wrong on this one they dont tax retrospectively but that does not mean they use values at time of tax change

but obviously your a great tax expert

[shoppeacenquiet]

Some people seem to have trouble differentiating between "consultation" and the finished law.