UK Resident Landlords
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| Overview |
| Forms to get you started |
| Fees |
| Useful notes for agents |
| HMRC Guidance |
| Frequently Asked Questions |
| Rates & tables |
| Maintaining your records |
| Technical notes |
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| Overseas Resident Landlords |
| Company Info |
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Technical notes
LEAVING THE UK
- Don’t forget to tell the taxman when you go.
- You may continue to get personal allowances.
- Special rules for Capital Gains Tax.
- Timing is everything.
A UK resident pays tax on all his/her income. In calculating the amount of income tax due the taxpayer may receive a certain amount tax free (this is the personal allowance – see Rates and Allowances), then a certain amount is taxed at the basic rate and the rest is taxed at the higher rate. National Insurance contributions are not payable by non-residents unless they wish to preserve their rights by making voluntary payments.
Tax Refund on Leaving
If you have been an employee in the UK the taxation of your income was dealt with by your employer under the PAYE scheme. This scheme assumes that your allowances and entitlement to the basic rate of tax are spread evenly over the year. This means that if you leave half way through the year you have only had half your tax free allowance (“personal allowance”) and only half the amount at the basic rate to which you are entitled. The result is that for the tax year, if you have no other income arising in the UK once you have emigrated, you will have paid too much tax. If you have other income such as property income or deposit interest you may still have paid too much tax. You may claim a refund on leaving the UK on form P85 (use form P85S if you are a foreign national and were in the UK for employment only). The form will ask you about the income you expect to have arising in the UK after you have left (including property income) and this will be taken into account in calculating your refund. As with any calculation made before the end of the tax year, this will only be an approximate calculation, so do remember to submit your Tax Return following the end of the year in which you emigrated if you want a precise calculation.
Tax Free Bank Interest
If you are going to be neither resident nor ordinarily resident and you are going to a country with which the UK has a double taxation agreement then you can apply to receive your bank interest without deduction of tax using for R105 (available from your bank or building society). As the tax due on interest is limited to the amount deducted at source by the bank or building society and once the bank or building society has accepted the form R105 they will deduct nothing, then the interest is effectively free of UK tax. The interest may be taxable in the country to which you move or in some other country.
Other Income
Other income arising in the UK is still taxable even though you may be non-resident. See Non-Resident Landlord.
Capital Gains
An individual is liable to Capital Gains Tax on all disposals if he or she is resident or ordinarily resident in the UK. If he or she is domiciled in the UK then he or she is liable to CGT on gains wherever they arise. A person who is not domiciled in the UK but who is resident and ordinarily resident and who sells an overseas asset is only subject to Capital Gains Tax to the extent that the proceeds are remitted to the UK. The exception is that non-residents are liable to capital gains tax on the disposal (or removal from the UK, or cessation of business) of business assets where that business was carried from a permanent establishment in the UK.
Non-residents may be subject to Capital Gains Tax on the gains made on the disposal of UK assets including land and buildings. See Capital Gains Tax. Someone who has been resident or ordinarily resident for any part of at least four out of the last seven years, and who becomes non-resident for less than five tax years will be liable to tax on the disposal of assets owned before they left the UK. Gains made in the year of departure will be assessed in that year, later gains will be taxed when they again become UK resident. Gains on assets acquired while the taxpayer was non-resident and that disposed of before 5th April before the date of becoming UK resident again are exempt from tax.
The “split year” treatment is a means of treating people as being non-resident for tax purposes from the time they leave the UK to the time they return to become resident –rather than using 6th April after the date of departure to 5th April before the date of return. The “split year” treatment is only available to those who have not been resident in the UK for four out of the last seven years and who emigrate for a period covering not less than five full tax years. In general terms this means that the split year basis is available to foreign people coming to the UK for a short period, but not to UK residents emigrating for a short period then returning.
If split year concession does NOT apply to you, and you dispose of an
asset between the date of emigration and the following 5th April, then
the gain made on that disposal remains liable to UK Capital Gains Tax
subject to the normal reliefs and allowances. If you dispose of an asset
after 5th April following emigration, and you remain non-resident
for five full tax years (or more) then the gain made on the disposal is
outside the scope of UK taxation. The reverse applies on your return to
the UK :- if you sell an asset after the 5th April preceding your return
to the UK (and becoming resident once more) then the gain on the disposal
is subject to Capital Gains Tax subject to the normal reliefs and allowances.
Inheritance Tax
The taxation of the estate of a deceased person differs from country
to country. In some countries there are rules as to who inherits what.
If you die abroad you may be subject to the inheritance tax (or its equivalent)
in several different countries. It is vital that you take professional
advice not only in the UK but also in the country in which you intend
to become resident before going there. You will probably be advised to
make a will in each jurisdiction.
DISCLAIMER
© Landlords Tax Services Ltd 2008 All Rights Reserved - In an article such as the one on this page we can only give brief general guidance and cannot cover all situations. This guidance may not cover all your personal circumstances and so you should not rely on it. Before taking action or not, always do your own specific research and seek appropriate professional advice which takes into account your personal circumstances, with the full facts of the case and all documents to hand. Neither Maurice Patry F.C.A. nor Landlords Tax Services Ltd can be held responsible for the consequences of any action or the consequences of deciding not to act.