Investors have the option of purchasing property as an individual or via an investment vehicle, such as through a company. Different taxes apply at different stages of owning a property — when you buy it, whilst you own it, and when you sell it.
In Part 1, we covered the taxes that are applicable at the purchase stage of the investment. Here in Part 2 of the series, we cover the next stage of your investment, i.e. when you have already taken possession of the property.
If you rent out your home, you may need to pay income tax on any earnings/profit from rent, after deductions or allowable expenses. This may include
- Interest on loans
- Repairs and maintenance
- Ground rent
As a foreigner renting out your property in the UK, you are classed as a non-resident landlord by HM Revenue and Customs.
OWNING AS AN INDIVIDUAL
The standard personal allowance is the amount of income you don’t have to pay tax on every year. As a foreign property investor earning rental income in the UK, you qualify for the standard personal allowance if it is included in the double-taxation agreement between the UK and the country you live.
For example, Malaysians who invest in UK property are eligible for this yearly allowance. Singaporeans, however, are not.
You get a standard personal allowance of £11,850, unless your income is £100,000 or above. The allowance decreases incrementally (see table below) if your income is above £100,000.
Your personal allowance can vary if you apply for Marriage Allowance or Blind Person’s Allowance.
If you have the standard personal allowance of £11,850, you pay 20% tax on the next £34,500 of your income.
If you do not have any personal allowance, you are taxed at 20% up to £46,350 of your income.
For the portion from £46,351 to £150,000, you pay 40%, and for the portion above £150,000, you pay 45%.
As a foreign investor, you can file your rental income taxes to HM Revenue & Customs by getting your rental in full and paying through self-assessment (fill in form NRL1).
OWNING THROUGH A COMPANY
If you own property through a company, you will be taxed differently.
We hope this has been helpful! Stay tuned for Part 3 of Investment Vehicles: Selling a UK Property.
What are your thoughts about buying UK Property through an investment vehicle? Drop us a comment below. If you are interested to explore UK Property’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at firstname.lastname@example.org!
Disclaimer: This article serves as a guide to investors. Kindly note that CSI Prop is not a licensed tax advisor. Accordingly, you should seek advice based on your particular circumstances from independent advisors and planners.
By Ian Choong
- Featured image from Property Moose