This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Foreign Property Tax Advice Needed

John_Doe
Foreign Property Tax Advice Needed

Postby John_Doe » Sun Jul 18, 2021 2:38 pm

Hi guys,

I need some advice as to what (if any) of my tax liability is for a property I own abroad. Background info as below:

  • I'm currently 24, but when I was 16 my Polish father gifted me an apartment in Warsaw, it is currently worth about £110,000.
  • I also have £20,000 in savings in Poland from rental income from the apartment.
  • All relevant taxes in Poland have been paid for.
  • I'm half English/half Polish and hold British Citizenship but not Polish Citizenship.
I now am looking to sell the apartment in Poland and transfer the cash and all the savings over to England in order to put it down as deposit for a mortgage to buy a house in England.

Please could someone advise me on what I need to do in order to get this done?

Thank you!

AGoodman
Posts:1249
Joined:Fri May 16, 2014 3:47 pm

Re: Foreign Property Tax Advice Needed

Postby AGoodman » Mon Jul 19, 2021 1:12 am

Assuming you have been resident in the UK for your entire life, it is possible that you should have been paying UK tax on your rental income since you were 16.

Three things could save you from liability -

(a) You would receive credit for Polish tax paid on the same rental income (so if Polish tax is higher than UK tax, there is no UK liability);
(b) Your personal allowance, which I assume you weren't using when you were 16 although you could be now; and
(c) The usual deductions such as maintenance costs and local agents fees.

When you sell, you will need to file a UK interim return online within 30 days. You should look into this before you sell to get the passwords set up etc. The UK tax will be charged on the difference between the sale value and the market value when it was given to you. The first £12,300 of gain is free but then the balance is taxed at 18% or 28% depending on whether you are a basic or higher rate earner or the gain takes you into higher rate territory.

The actual act of transferring the money to the UK doesn't trigger any taxes.

John_Doe

Re: Foreign Property Tax Advice Needed

Postby John_Doe » Mon Jul 19, 2021 7:54 am

Assuming you have been resident in the UK for your entire life, it is possible that you should have been paying UK tax on your rental income since you were 16.

Three things could save you from liability -

(a) You would receive credit for Polish tax paid on the same rental income (so if Polish tax is higher than UK tax, there is no UK liability);
(b) Your personal allowance, which I assume you weren't using when you were 16 although you could be now; and
(c) The usual deductions such as maintenance costs and local agents fees.

When you sell, you will need to file a UK interim return online within 30 days. You should look into this before you sell to get the passwords set up etc. The UK tax will be charged on the difference between the sale value and the market value when it was given to you. The first £12,300 of gain is free but then the balance is taxed at 18% or 28% depending on whether you are a basic or higher rate earner or the gain takes you into higher rate territory.

The actual act of transferring the money to the UK doesn't trigger any taxes.

Thank you for your help.

I received the flat at 16, but didn’t get a Polish bank account until I was 18, at that point the rental income was transferred to me and has accrued up until now. Not sure if that changes anything?

Would it be worth hiring an accountant or financial adviser for this situation? Would it help me save on tax or is there not much of a point? If so, what sort of expert should I look for?

Thank you.

maths
Posts:8256
Joined:Wed Aug 06, 2008 3:25 pm

Re: Foreign Property Tax Advice Needed

Postby maths » Mon Jul 19, 2021 9:09 pm

Have you filed any UK Tax Returns at all irrespective of whether you disclosed the foreign rental income on such Returns?

Are you employed by a UK employer?

Are you married?

What is the gross amount of rental income you typically receive?

John_Doe

Re: Foreign Property Tax Advice Needed

Postby John_Doe » Tue Jul 20, 2021 5:58 am

Have you filed any UK Tax Returns at all irrespective of whether you disclosed the foreign rental income on such Returns?

Are you employed by a UK employer?

Are you married?

What is the gross amount of rental income you typically receive?
I had an accountant file a self assessment for me when I was self employed at age 18. But since then I haven’t since I’m PAYE.

I am employed by a UK employer.

I am not married.

I receive £560 (3000PLN) gross income per month.

maths
Posts:8256
Joined:Wed Aug 06, 2008 3:25 pm

Re: Foreign Property Tax Advice Needed

Postby maths » Tue Jul 20, 2021 5:43 pm

You say you have circa £6,500 of rental income per annum.

I assume your personal allowance is offset against your employment income. If so UK income tax is payable on the £6,500 (although there is a tax free £1,000 for some tax years) less expenses.

Any UK tax due on the rental income less associated expenses (possibly at 20%) will be reduced due to a credit for the Polish tax you have paid.

Say rental profit is £5,000. Less £1,000 tax free means £4,000 is taxable at say 20%. Tax therefore 20% of £4,000 ie £800.

Assume Polish tax say 10% of £4,000 ie £400.

Net UK tax £800 less £400 ie £400.

Strictly speaking you should have disclosed the rents on your UK Tax Return.

HMRC launched a campaign to get people to declare their offshore rental income. Take a look at this:

https://letproperty.campaign.gov.uk

John_Doe

Re: Foreign Property Tax Advice Needed

Postby John_Doe » Tue Jul 20, 2021 8:54 pm

You say you have circa £6,500 of rental income per annum.

I assume your personal allowance is offset against your employment income. If so UK income tax is payable on the £6,500 (although there is a tax free £1,000 for some tax years) less expenses.

Any UK tax due on the rental income less associated expenses (possibly at 20%) will be reduced due to a credit for the Polish tax you have paid.

Say rental profit is £5,000. Less £1,000 tax free means £4,000 is taxable at say 20%. Tax therefore 20% of £4,000 ie £800.

Assume Polish tax say 10% of £4,000 ie £400.

Net UK tax £800 less £400 ie £400.

Strictly speaking you should have disclosed the rents on your UK Tax Return.

HMRC launched a campaign to get people to declare their offshore rental income. Take a look at this:

https://letproperty.campaign.gov.uk
Ah right okay, thank you.

I’m currently earning £48k per annum.

So what would be my total tax due based on the sale of the apartment at £110,000 + £20,000 savings taking into account my personal allowance and current salary?


Return to “Property Taxation”