If you are a British expat letting out a home while living overseas, you could be in for a nasty tax shock.
HM Revenue & Customs is warning landlords collecting rent from buy to lets or shared houses in multiple occupation (HMO) that they should declare any rental profits or capital gains on selling a property.
To make the process easier, HMRC is offering landlords the chance to join the Let Property Campaign to bring their financial affairs up-to-date if they have neglected to file tax returns in the past.
Am I a non-resident landlord?
You can find out by answering some simple questions:
- Have you rented out or currently rent out property in the UK?
- Is the property residential, ie a house, flat, HMO, or a permanently sited caravan or houseboat rented out on an assured tenancy agreement?
- Do you live outside the UK for more than six months at a time?
If the answer to these is ‘yes’, then you are probably a non-resident landlord.
Why should I declare my rental profits or gains?
HMRC promises the best settlement terms to landlords taking part in the Let Property Campaign.
Not taking part means risking higher penalties if HMRC finds out an expat has let a property without declaring the income.
Penalties for landlords dealing with undeclared profits or gains outside the Let Property Campaign have a 100% surcharge, so expats could pay twice as much tax as they owe.
How will HMRC find out I am a landlord?
If you have a mortgage, employ a letting agent, advertise the property for rent online or have tenants with benefits, then HMRC probably already knows you are a landlord and has you on a list of potential tax avoiders.
This information is collected from lenders, letting agents, local councils and online property portals by default.
I’ve spent the tax and can’t afford to come forward
Unfortunately, that is not an excuse for not paying any tax that you may owe.
However, HMRC pledges to come to an agreement for paying tax from previous year, so long as the offer is reasonable and the payments are maintained.