Despite the UK entering its first recession in over a decade, the buy-to-let market has remained relatively stable. In fact, with house prices falling and tenant demand on the rise, it could be an opportune time to invest. However, for overseas investors, buying and renting property in the UK is not always straightforward. In this article, we take a closer look at some of the tax implications for non-resident landlords and what they mean for your long-term investment.What is a Non-Resident Landlord?According to HM Revenue and Customs (HMRC), if you earn rental income from property in the UK and spend six months or more overseas in any tax year, you’re considered a non-resident landlord. This applies even if you’re classed as a UK resident for tax purposes. Here are some other individuals and entities that qualify as non-resident landlords under UK law:
A company that rents out property in this country but has a registered office or main place of business outside the UK.
Crown servants (such as diplomats) or members of the armed forces that are posted overseas.
Individuals or companies that have a PO Box or ‘care of’ address in the UK but whose usual place of abode is in another country.
By receiving your rental income in full and filling out the relevant sections of your self-assessment tax return (or your corporation tax return if you represent a non-UK resident company).
By paying basic rate tax at source via your letting agent or tenants.
Your letting agent or tenant will deduct tax from your rent at the basic rate, after allowing for any expenses they might have incurred.
They will provide you with a certificate at the end of the tax year showing how much tax they’ve deducted in total.
You will then declare your rental income and profits on your tax return.
You may still have additional tax to pay depending on your circumstances and income levels.
Capital Gains Tax (CGT) – As of April 2015, any non-resident landlord selling property in the UK is subject to capital gains tax. This means you’ll have to pay a percentage of any profit you make on the sale of your property within 30 days of completion.
Corporation Tax – Since April 2019, all non-UK resident companies are required to pay 19% corporation tax on any profits generated by the sale of UK property.