Do I have to pay UK tax?

Paying UK tax—are you sure you need to?

Are you a non-resident landlord? Do you own UK rental property but live outside the UK? Read on to find out if you really need to be paying UK tax.

Owners of UK rental property who live outside the UK may be lulled into thinking that allowing the letting agent to take 20% tax is all they need to do – and after all, it is easy. If this is you, we could save you up to £5,000 per year.

Very many owners of UK investment property are entitled to a UK allowance even though they live outside the UK. This is known as the Personal Allowance. At present this allowance reduces the rate of tax on the first £12,570 of UK income to 0%.

Who is entitled to this allowance?

1. Residents of the UK
   • An individual who is a resident of:
     Austria, Barbados, Belgium, Fiji, France, Germany*, Greece, Ireland, Kenya, Luxembourg, Mauritius, Myanmar (Burma), Namibia, Netherlands, Portugal, Swaziland, Sweden, Switzerland, Zambia.
     
     Please note: If an individual is a resident of Kenya, Mauritius or Zambia, or a resident but not a citizen of Austria, Belgium, France, *Germany, Luxembourg, Netherlands, Portugal, Sweden, or Switzerland, they are not entitled to personal allowances if their UK income consists solely of dividends, interest and royalties or any combination of them.
     *Germany – from 6th April 2011 residents of the country are not entitled to personal allowances unless they are an EEA National.        
2. An individual who is a national of Israel or Jamaica
   
   
3. An individual who is an EEA national of:
   Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Irish Republic, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal inc. Madeira & The Azores, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom.
   
   
4. An individual who is a national and also a resident of:
   Argentina, Australia, Azerbaijan, Bangladesh, Belarus, Bolivia, Bosnia and Herzegovina**, Botswana, Canada, Côte d’Ivoire (Ivory Coast), Egypt, Gambia, India, Indonesia, Japan, Jordan, Kazakhstan, Korea, Lesotho, Malaysia, Montenegro*, Morocco, New Zealand, Nigeria, Oman, Pakistan, Papua New Guinea, Philippines, Russian Federation, Serbia**, South Africa, Sri Lanka, Sudan, Switzerland, Taiwan, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, Uzbekistan, Venezuela, Vietnam, Federal Republic of Yugoslavia*, Zimbabwe.
   
   **Please note: Entitlement continues under the Double Taxation Treaty the UK had with the former Yugoslavia until such time as a new agreement takes effect.

Notable exceptions to the lists are USA, China, and Saudi Arabia. However, residents of these countries are entitled to the UK Personal Allowance if they are nationals of a country in lists 3 or 4 above.

Contact us now to see if we could save you TAX

The information contained in this article is believed to be correct at the time of publication. The content of this article is intended to be a brief summary of the principal points of the legislation or proposed legislation only, and it is provided for general guidance only. It may not take into account subsequent changes in the law and of necessity it omits much detail. Taxation is a complicated subject and is subject to change. You should only rely on advice prepared specifically for you. Neither the writer nor Landlords Tax Services Ltd can be held liable for any loss arising from any act or omission by you as a result of your understanding of this article. If the subject matter is of interest you should contact us to see if there is a relevant update, and to take professional advice which takes into account your circumstances.