COMMERCIAL PROPERTY AND RENTAL INCOME TAX IMPLICATIONS IN THE UK.
UK business property can be an alluring venture choice, yet it is imperative to comprehend the duty outcomes. A series of changes have been witnessed during the recent time to the taxation of UK property- the significant exception being the non-resident capital gains tax regime to be extended to commercial property disposals from April 2019.
Buying the property:
Purchasing a property in the UK is subjected to Stamp Duty Land Tax (SDLT) for England and Northern Ireland, Land & Building Transaction Tax (LBTT) for Scotland and Land Transaction Tax (if the sale completed on or after 1 April 2018) for Wales.
You needs to pay tax on your rental income if you rent out a property in the UK. Non-resident companies (does not carry on a trade in the UK) pays basic rate income tax (currently 20%) on rental income, whereas non-resident individuals are subjected to a marginal rate of 20-45% and 45% on net income to be paid by foreign trustees.
How you pay tax?
Two ways are available to get your rent either:
- in full and pay tax through Self Assessment – if HMRC allows you to do this.
- with tax already deducted by your letting agent or tenant.
If you decide to pay tax on rental income through Self Assessment, fill in form NRL1i and send it back to HMRC. On approval of your application, HMRC will direct your letting agent or tenant not to deduct tax from your rent and you’ll need to declare your income in your Self Assessment return. Your application with HMRC may face failure or not approved if your taxes are not up to date.
You may also get your rent with tax deducted by either your letting agent or tenant. Your letting agent or tenant will:
- deduct basic rate tax from your rent (after allowing for any expenses they’ve paid)
- give you a certificate at the end of the tax year saying how much tax they’ve deducted.
Filing your tax return requires you to send your tax return by post, use commercial software or get help from a professional accountant rather than using HMRC’s online services.
Entitlement to personal allowance:
You are entitled to get personal allowance of tax-free UK income each year if:
- you’re a citizen of a European Economic Area (EEA) country- including British passport-holders.
- you’ve worked for the UK government at any time during that tax year.
You may also get if it’s included in the double-taxation agreement between the UK and the country you reside in.
Claim personal allowance and tax refunds if you’re not resident in the UK:
If you’re a resident of the country which has a double taxation treaty with the UK , you may have the option to apply for some of your income to be paid with no UK tax or at a reduced rate of UK tax. It includes incomes like pensions, interest, royalties, flexible pension and trivial commutation payments.
Send form R43 to HMRC to claim personal allowances and tax repayment if you’re non-resident in the UK.