principle place of residence vs buy-to-let

[tasja]

I am departing to the US for 5 months and then have the obtion to return to the US 2 months later after my return to the UK.

I am looking to buy a property but due to my uncertainty of the US position, I don't know if I should buy-to-let or buy a property as my principlae place of residence even though it will be empty for the first 3-5months and then I might decide to move to the us for longer then needing to rent it out.

What would my tax implications be?

What

[accountant@uktaxshop]

If you rent out a property in the UK, regardless of your resident status, you will be liable to UK income taxes. However so long as your register the property these will not be deducted at source, and you will get a personal allowance, and after expenses you may find you have no or very limited liability as a non-resident, and just have to fill in a tax return every year. I have a number of clients in this situation.

The other tax to consider is CGT. If you have a main residence in the UK at a decent internal prior to moving abroad, and then (eventually) return to it you can claim a full PPR relief on the property when you come to sell as if you had always lived there. Whether it is rented in between is not relevant. What is relevant is that you can show it is your home.

Alternately if you sell the property whilst being abroad for 5 whole tax years, there is no liability to CGT, regardless of having lived there or not.

From a CGT point of view the worst thing to do is to buy a property, not live in it and then sell if within 5 years. You will then be liable for the full gain, less taper relief.

If you need some further help either with planning your property taxes or residence issues, please let me know.

Regards

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436