I ave just filled out my overseas landlord form for exemption, not to take taxes out of the rent every month. Had to go to Newcastle. I need to know what procedures go into place now. Good I file taxes with UK, if so what do I do etc. I talked to Customer Service in Wales. Well, he told me to send the form to Newcastle, I asked offer questions. He said they will advise me. I know that there is a system of credits. I have kept my bills for airfare etc, and some expenses on the house. Any advise would be helpful.
I presume you are renting out your house in the UK whilst living in the US? We do that, and the first year I must admit we used an accountant to file our taxes for us, in our case it was just too complicated. After the first year when everything was up and running it was a very straightforward tax return. You shouldn't owe any tax if you are renting your house as you get an annual tax allowance.
If your application to receive rents with no tax deducted is approved, then you will receive gross rents (minus any fees taken by a lettings agent, if you have one). You have to keep track of this income, as well as any expenses associated with the rental of the property - insurance, repairs, mortgage interest payments etc. (you cannot offset anything capital from your taxes).
Sometime after April, the Inland Revenue will send you a self-assessment tax form that you need to fill in and return to them by the end of September if you want them to calculate your taxes, or the end of January if you or your accountant are to calculate them. You don't need to send in statements and receipts - but you need to hang on to them in case you are audited.
You get a personal allowance of £4745 - therefore pay 0% tax on the first £4745 profit. Then you'd pay 10%, 22% and 40% on the next chunks.
If your application to receive rents with no tax deducted is declined (for example, if you are expected to owe UK taxes), then you will be in a situation of having to claim a refund as you offset your expenses, personal allowance and the 10% tax band.
If you actually lose money (unlikely if you don't have mortgage interest to pay), you can carry your losses onto the next and subsequent years' tax returns.
You will also need to include your rental income on your US tax return, so you'll have the joy of sorting your records for both April - April and January - December tax years (it makes your head hurt, honest!). If you are a US tax payer and you don't end up pay British taxes, you'll almost certainly have to pay US income tax on it (you get Foreign Tax Credit for any foreign taxes that you do end up paying).
Sorry to be the bearer of bad news but you have to pay taxes on the profits from rental income regardless of allowances. It is schedule A income I believe where as employment (where you get the allowances) is schedule D - they are not to be mixed. I am a qualified UK accountant and have been renting out 3 houses in the UK for the last 5 years..........all profits are taxed at a flat rate of 20% but there are many deductions you can legally take so the profits can be easily reduced (especially if you have a mortgage).
The Inland Revenue will not automatically send you a form in April.....if this is not received by mid May you will have to call and aks for one, penalties apply for not filling it in if you ae caught.
Sorry to be the bearer of bad news but you have to pay taxes on the profits from rental income regardless of allowances. It is schedule A income I believe where as employment (where you get the allowances) is schedule D - they are not to be mixed. I am a qualified UK accountant and have been renting out 3 houses in the UK for the last 5 years..........all profits are taxed at a flat rate of 20% but there are many deductions you can legally take so the profits can be easily reduced (especially if you have a mortgage).
Hmm...we used our personal allowances (I remember it vividly, because Deloitte forgot to acknowledge DH's Canadian citizenship and his tax bill was higher than mine; when they corrected it, it became the same as mine). Maybe because our house was classified as our primary residence...?
The Inland Revenue will not automatically send you a form in April.....if this is not received by mid May you will have to call and aks for one, penalties apply for not filling it in if you ae caught.
They do when you register with the Non-Resident Landlord Scheme.
http://www.inlandrevenue.gov.uk/cnr/nr_landlords.htm
Not sure how you got away with it being a primary residence when you didn't live there, hence the need to declare the rental income.
Unfortunately Deloitte must have got it wrong but did you a huge favour!!!!!!
It is also easy not to declare overseas rentla income on your US tax form as they never know and the UK are entitled to the tax in any event - I have managed to keep my tax affairs entirely sepaarte up until now which makes things a whole lot easier.....
You also get the tax form if you have ever paid higher rate tax.......
I'd be surprised if Deloitte got it wrong, but obviously it's possible. We didn't own the house that we lived in in the US, so perhaps that's why we were able to count our UK house as our primary residence. It was always our intention to return. Now I'm curious - I'll have to look back over those returns...From Lizzi's post, it seems that they are getting a PA as well. Of course, this might be of no use whatsoever to Welshrain, as I don't believe she has recently lived or plans to live in the property she own.
We declared our UK rental income on our US return. There weren't any problems at all with it. We also go mortgage interest relief and asset depreciation.
As with US-sourced income, you are completely responsible for keeping your own records. When we were audited by the IRS, it didn't faze them that we showed our UK mortgage statements and bumph from our rental agent. I can't see how it would have been any different had we been renting out a US property.
Welshrain, as long as you file your UK tax return before 30th September following the close of the tax year, the Inland Revenue will calculate your taxes and you don't have to worry about understanding whether you get an allowance or not. What you pay to the UK Revenue, you don't pay to the US, so there's not a lot in it at the end of the day.
I have some thoughts. I did not get the first payment til 8 Sept, and that got eaten-up bye the rental people, have a receipt. I have a ton of receipts, spent five thousand pounds on the place. Can I used those receipts in one year, or shall I spread them over a few years. I had know intension of filing here, I am on a widows military pension, and social security disability. No mortgage on the one home, it is under a historical charter from Wales though. I have a mortgage in the US. Any thoughts, please.