Central France
Tax on overseas property lettings
If you live and pay tax in the UK you must declare rental income from overseas property lettings on the foreign pages of your tax return. If you pay foreign tax on the income, you can usually get credit for this against the UK tax you have to pay on it.
Declaring income from overseas property lettings
You have to declare any income you get from overseas property lettings on the supplementary foreign pages of the Self Assessment tax return. How much tax you'll pay depends on whether you're 'resident' in the UK and 'ordinarily resident' or 'domiciled':
- if you're in the UK for 183 days or more in a tax year, you're a 'resident' for that year
- you're also treated as 'resident' if you're in the UK for an average of 91 days or more in a tax year (worked out over a maximum of four consecutive tax years)
- if you're resident in the UK year after year you will be treated as 'ordinarily resident'
your domicile is normally acquired at birth, but this is a general law concept covering a range of factors
If tax is due on the 'arising basis'
As with income from a UK rental business, you normally work out the 'net profit' (or loss) for all your overseas property lettings as if it's a single business. To do this, you:
- add together all your rental income
- add together all your allowable expenses
- take the expenses away from the income
To arrive at your taxable profit, you can deduct certain allowances from your net profit. Your final profit counts as part of your overall taxable income, and you pay tax on it at your normal rates.
Expenses and allowances - what counts?
You can deduct the same expenses and allowances from overseas property letting income as from UK property letting income, including travel costs. (The expenses must be solely for running your property letting business.)
Profits and losses from different overseas properties
Because all overseas property lettings are treated as a single business, losses from one overseas property are automatically offset against profits from the others. And if you make a loss overall, you can offset it against future years' overseas rental profits. But UK and overseas letting businesses are taxed separately - losses from one can't be offset against the profits from the other.
If you're taxed on the 'remittance basis'
In this case you are taxed only on the amount of income received in the UK.
What happens if you've already paid tax on the income abroad?
If you've already paid tax on your rental income abroad you can usually claim credit against the UK tax you'll have to pay on it.
Or you can deduct the foreign tax from your overseas rental income when you work out the profit you'll pay UK tax on.
Recording information on your tax return
If you're claiming foreign tax credit relief, you'll need to show separately:
- the profit and loss for each property
- the amount of foreign tax paid on each
If you're not claiming relief for foreign tax, add together all your income and expenses for your overseas property letting and show the profit or loss as a single figure.
What you do about exchange rates
When you work out your taxable income, you have to convert it into pounds sterling. You use the exchange rate that applied when the rent was due (or when you brought it into the UK if you're not living in the UK permanently).
Tax if you dispose of your overseas property
If you dispose of (eg sell or give away) your property you may have to pay foreign tax. You may also have to pay UK Capital Gains Tax (CGT).
If you are resident and/or ordinarily resident and domiciled in the UK
You'll be liable to CGT whether or not you bring the gains into the UK.
If you are non-domiciled
You'll only be liable on gains you transfer to the UK (whether the gains were made in the current year or an earlier year). Where CGT is due you can usually get credit against foreign tax you've paid on the same disposal.
Useful Links:Detailed definitions of resident, ordinarily resident and domicile
Expenses and allowances on income from property
More about Income Tax and current rates
Claiming foreign tax credit relief - page FN3 foreign pages helpnotes (PDF document, 187K)
Check foreign exchange rates
Capital Gains Tax
Claiming foreign tax credit relief on capital gains - HMRC helpnotes (PDF document, 173K)
Article & Copyright: www.direct.gov.uk
