Are you a non-resident landlord?
Are you resident in the UK?
This is not as straightforward as it once was. A Statutory Residence Test came into effect as of 6th April 2013. To determine if you are a UK resident, you need to consider the automatic tests:
The automatic overseas test:
If you meet the following criteria:
- In one or more of the previous three tax years, you lived in the UK for fewer than 16 days during that tax year; or
- The previous three tax years you have not been resident in the UK and you spent fewer than 46 days in the UK in the tax year; or
- During the tax year, you work full-time overseas without any significant breaks, spend fewer than 91 days in the UK, and work for fewer than 3 hours on fewer than 31 days. However, there are some exceptions.
You will automatically be treated as not a resident of the UK for that tax year.
The automatic UK test:
If you meet the following criteria:
- The length of your stay in the UK is more than 183 days in a tax year; or
- During a tax year, you have been residing in the UK for more than 90 days, are present in that home for at least 30 consecutive days and have no home overseas for 91 consecutive days (some of which fall within that period) or if you have a home but have not been in it for more than 30 days.; or
- During any period of 365 days with no significant breaks (at least 31 days), you work full time in the UK (over 3 hours per day) for more than 75% of those working days.
You will be considered a UK resident automatically.
In the event that you do not meet either of the automatic test criteria then the following ties to the UK are taken into account:
Having a family connection
There is a family tie if your spouse or civil partner (unless you are permanently separated), your partner (if you live together) or your child lives in the UK.
Ties related to accommodations
There is an accommodation tie if you live in the UK continuously for more than 91 days during the tax year and spend at least one night in your own home or at least 16 nights in a close relative’s home during the tax year.
A tie via employment
Work ties typically apply to individuals who work more than three hours a day for more than 40 days in one tax year.
A 90-day tie
90-day ties apply if you spent more than 90 days in the UK during the previous two tax years.
Tie to a country (only if you were a resident in the UK in previous tax years)
A country tie occurs if you were present in the UK at midnight more days than any other country in the tax year.
If the automatic tests above are not met, you will be treated as a UK resident if you meet any of the following ties:
Days spent in the UK UK resident in 1 Not UK resident
of last 3 years in any of last 3 years in any of last 3 years
16-45 4 N/A
46-90 3 4
91-120 2 3
over 120 1 2
If the automatic tests above are not met and you do not have the number of ties above for the days spent in the UK, you will be treated as not resident in the UK for that tax year. We strongly advise that you get in touch and get help to establish you residency status
What happens in the year you leave or return?
Generally, you can claim split-year treatment for income tax purposes if you either leave or come to the UK permanently or if you meet certain conditions. To establish the income and gains that are liable to the UK in a given tax year, all income and capital gains earned up to the date of departure and after the date of return are added to your UK income for the period you were a non-resident.
There are 105 pages of guidance available on the Government website in Booklet RDR3, which expands on the brief summary given above.
Make sure you tell the taxman when you leave
While abroad, British and EU citizens should continue to receive personal allowances. Depending on your country of citizenship and where you live, you may be subject to the Double Tax Treaty when living in the UK.
What exactly is taxed?
UK Resident
UK residents pay tax on all their income and capital gains worldwide. Individuals who are not domiciled in the UK are subject to special rules (which are not discussed here). In some countries, being a resident, but not being a domiciled individual is not the same thing. You may remain domiciled in the UK even if you do not reside there if you keep your British passport even if you move and live abroad.
UK Non-Resident
In general, you are only taxed on income received in the UK. If you work for the Crown, however, your income is taxable in the UK wherever you earn it. Certain countries have double tax treaties with the UK, which means that some income received from the UK may be taxed in your country of residence rather than in the UK.
Income From Property
The income from a UK property, however, is usually taxed in the UK regardless of where you live. Rent paid to non-resident landlords must be deducted by tenants or agents at the basic rate. For non-residents who wish to continue receiving UK rental income gross, you must complete Form NRL1 and submit it to HMRC’s non-resident centre. After this approval, HMRC should notify your tenant or agent and approve gross rent payments. You will still need to pay taxes on rental profits in the UK, but you will be able to manage your cash flow better.
Other Income
In the UK, other income may still be taxable depending on the Double Tax Treaty with your country of residence.
Income Tax Refund when you leave
You will have paid income tax under PAYE if you have worked in the UK. Depending on when you leave your job in the UK, you may have paid too much tax. Form P85 can be used to claim a refund when you leave the UK. Your refund will be calculated based on the income you expect to receive in the UK after leaving (including property income). In addition, for each year you receive income from the UK, you may need to file a tax return. It is important to note that National Insurance contributions cannot be refunded.
Capital Gains
If a residential property is disposed of after 5th April 2015 or commercial property after 5th April 2019, there may be a Capital Gains Tax liability.
YOU MUST MAKE A RETURN AND PAY THE TAX ON OF THE DISPOSAL OF THE PROPERTY WITHIN 60 DAYS OF THE COMPLETION OF THE SALE.
It is necessary to file a return regardless of whether you already file a self-assessment return. Should you return to the UK within five years and dispose of any other asset, you may also be liable.
It is advisable to find out what the tax reporting requirements are in the country where you reside and to consult a local tax adviser, if needed.
If you have any other queries at all, please get in touch with us on 0800 907 8633, via enquiries@uklandlordtax.co.uk or via our online contact form to verify and confirm your resident or non resident status.
Do you have a question for our experts?
If there’s a property tax issue that has you puzzled or worried, get in touch. Everyone on our team loves to talk, especially when it helps people like you find peace of mind.