Tax on rental income?

[beano_bill]

Hi All,

Hoping to pick the collective brain! OH & I have a flat here in the UK & in order to avoid the mortgage redemption fee & sooth my mothers "burning bridges" mentality, we are hoping to rent it out - possibly only until the redemption fee period is up or maybe longer..........

My question is this:

As I understand it, as the mortgage is jointly held the income is also joint. Therefore the £6k we earn is split & because its under the (current) £4,000ish personal allowance neither of us are liable to pay income tax to everyone's buddy Gordon.

I had a look at the HMR&C website and it mentioned that there is a Double-Taxation Agreement with NZ and as far as I can figure, tax in the UK is waived in favour of income tax in NZ. Where I understand there is no personal allowance

Naturally I don't want to pay the higher rate in NZ (preferably I'd rather not pay any tax at all, but there you go) if I can.

Does anyone have any experience of this?

I also understand there is a way of offsetting agents fees against tax but it seems a mute point if I have to pay it in NZ - surely charges in one country can't transfer to another????

Any help is gratefully received as we're going round in circles trying to figure out whether we'd be better off selling up before we go over & take the [unwelcome] hit.

Thanks in advance,

Beano

[Moorf]

Hi Beano

We did this too, except my rental property had been so for some time and I was already using an agent etc so that bit was sorted.

I sold it after being here 18 months and during that time it was a source of income and a safety net in the UK (do we have the same mother?!).

You will have to pay a Non Resident Landlord Tax. You won't pay tax on your UK earnings but you'll pay tax on it when declared in NZ, less the non-resident landlord tax and every other little expense you can find, including agent fees etc etc. It's worth investing in a good accountant who can wade through all the indexing, form filling and legal loops.

When all was said and done I did make a little from the rental each month but not enough to bother with really and I decided to cash it in once we knew we were staying in NZ for the foreseeable future.

Definitely worth seeking some professional advice to take into consideration your total financial picture.

Moorf

[beano_bill]

(do we have the same mother?!).

It seems to be a theme amongst Mothers (no offence Mums among us) none of my male friends & family seem to bothered - they ask what we're doing with it and generally the only comment is "oh. beer?" Mothers on the other hand........anyway we all know. Bless 'em.

For the first 4 years you are in NZ you are exempt tax on rental income in the UK

you can apply not to have to pay non-resident landlord tax.

WoooohOOOOOO!!!!!!!

Thanks to you both - and to think I wasn't going to ask!! Owe you both big drinks.

Beano.

[Trigirl]

For the first 4 years you are in NZ you are exempt tax on rental income in the UK.
http://www.ird.govt.nz/income-tax-in...reign-inc.html

After that you will pay tax in NZ on the rental income. You can offset council tax, insurance costs, interest on any mortgage (but not capital repayments) and agents fees/commission when you calculate your income. It doesn’t matter that these are incurred overseas.
This might be helpful
http://www.ird.govt.nz/resources/fil...52be/ir264.pdf

[Trigirl]

Provided your tax affairs are up to date when you leave the UK (you need to fill out form P85) and you've paid any tax owing then you can apply not to have to pay non-resident landlord tax in the same way as you would apply not to have tax withheld on your bank interest etc (use form NRL1 to apply)

[The Hodges]

We must have the same mother too. We are renting our house just in case, and this keeps the mother-in law happy. But I still cant seem to get my head around the tax thing. We are filling out a NRL1 form so we dont have to pay Landlord tax, the little we will make after the expenditure for the house is less the the personal allowance allowed, so will we still need to get accountant in the Uk to sort it out for us. Because I can imagine it would be a bit of a headache to do from the NZ.