Moving Abroad, How to minimise tax on renting out our UK property

[Suzanna]

Hi, wondering if anyone can help:

My boyfriend and I have bought a flat in London (as tenants in common). We are moving abroad and wish to rent out our flat, therefore the rent will be our only Uk income.

We expect the rental income to be approx 13k per annum (through an agency), and mortgage will be approx the same (although it is a repayment mortgage so interest repayments will make up about £9k).

What is the best way to minimise tax? Can we both use our tax free allowance (up to £4k??) Will we have to file a joint tax return?

Any help would be most appreciated!
Thanks
Suzanna

[hra]

Just a quick question (from an ex-landlord, not a tax expert!) Is the £13K income gross, or net i.e. have you factored in things like: letting and managing agents' fees, service charges, water rates (if payable), provision for maintenance and refurbishment, legal and inventory fees, wear & tear allowance, insurance, and maybe even council tax and other utility bills during void periods etc. etc. It may be that you can save a lot of tax simply by making sure you have taken all this into account in your declared profit.

[Suzanna]

The £13k is gross income before any of the other items that you have mentioned have been taken off.
We will probably be looking at taking 15% of that off for managing agents fees, and then all the other stuff on top.
What do you think? thanks
Suzanna

[Ian McTernan CTA]

Based on the figures given, it doesn't appear that taking all the costs into account you will be making much of a profit, as there is also the 10% wear and tear allowance to factor in if the property is let furnished.

If you are UK citizens then you will also have your personal allowance to set against the income. You will still both need to file a Tax Return and enrol in the NRLTD scheme to avoid having tax deducted at basis rate from the rent. Also, ensure you understand what will happen if you are abroad for several years and then return and then sell the property.

I would be more than happy to advise.

Ian McTernan CTA
McTernan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com

[Suzanna]

Yes, you are right that we are not expecting to make a massive profit on the flat - the reason that we bought it was to have a base when we come back to the UK in 2 years. We are hoping to break even whilst we are abroad.

In terms of selling the flat when we come back, could you let me know what you mean above? We would probably intend to live in it for a couple more years before selling.


Many thanks, all this help is much appreciated.
Suzanna