Tax implications of purchasing UK investment property - USERNAME: mary - 27/08/2012
Tax Question:
I am a non resident having left the U. K. some eight years ago. I have recently been offered the opportunity to purchase the freehold of a building consisting of four maisonettes.The premium should be approx. 12k & I am wodering if I will have any tax liability if I were to go through with the transaction.I am Irish & no longer intend to return to the U.K. I would probably purchase the freehold jointly with my partner & I wonder what is the best way forward.
Answer:
As a non-resident the main issue would be that you'd be subject to UK income tax on the rental profits under the non resident landlord scheme. UK tax at 20% would be deducted from the rental payments at source (unless the rents are less than £100 per week and paid directly by the tenant). You could file an election to receive the rents gross (ie without tax deducted at source). You'd then need to submit an annual self assessment tax return to account for tax on the rental profits. Dependent on your current country of residence you may be able to claim the UK personal allowance for offset against your UK income. If this was the only income of you and your partner you may be able to obtain an effective income tax exemption on the rental income of up to £16K in total.
As non residents you would not be subject to capital gains tax when you sell the property.
The value of the property would be within your UK estate for UK inheritance tax purposes. However if this is your only UK asset, you would be able to offset the £325K nil rate band against the property value (potentially covering a property of £650K if you purchase with your partner.
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About the Author
The Author of this article/answer is our site Editor, Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.
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Disclaimer
=============================================================i) Please note that the articles/answers contain general guidance only and do not constitute accountancy, tax, investment or other professional advice.
ii) The contents of this article/answer are for information only and are intended to assist readers in identify any tax planning opportunities that may be available to them. The information contained in this answer is not intended to be a substitute for taking proper taxation advice and should not be relied upon in this way. Always consult a qualified accountant or taxation adviser. Your situation will then be looked at individually and specific advice relevant to your circumstances can be given. The Expert does not accept responsibility for any loss arising as a result of reliance on any information contained in this answer.
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