Taxation
Local Rules
How the profits from your
British property investment are taxed depends on the rules that apply in
your country of residence. You should therefore consult your local tax office
for details.
Tax on the Operating Profits/Losses
Whatever
the tax rate is that will apply to the operating profits, it is unlikely
that the property will make an operating profit for the first several years
of ownership, hence no tax is likely to be payable until then. In the Sample
Calculation above, an operating profit is thus not achieved until Year 10.
Moreover, it will usually be possible to deduct earlier losses in later profits.
In the Sample Calculation, the accumulated operating profit does not become
positive until Year 17. In the U.K., for instance, this would mean that no
tax on the profits would be payable for the first 17 years of ownership.
Tax on the Increase in Property Value
How
this is taxed depends upon the tax rules in your country of residence. Please
therefore consult your local tax office on this matter.
U.K. Taxation
Whatever
your local tax rules, the operating profits are taxable in Britain. However,
if your country of residence has a double-taxation treaty with the U.K.,
it will usually be possible to have any tax paid in Britain credited against
any tax liability on the operating profits that has been incurred in your
country of residence. In any case, any operating profits are likely to be
modest. The real benefit of a U.K. property investment lies in the gradual
increase in the value of the property over time.
The
profit made on the increase in the property value will usually not be taxable
in the U.K. if it is your only property in the U.K. or if you do not reside
in the U.K.
As to council taxes in the U.K., the Tenant normally pays these. If
your property is unoccupied, you will usually have to pay council taxes for
the vacant period at a reduced rate. This should not add up to more than
£ 100 or so for a few months of vacancy.
Tax Forms
The following forms are used with the U.K. tax return:
-
Land and property (usually an integrated part of the tax return itself, Form SA100-15)
-
Non-residence, etc. (Form SA109)
The U.K. tax year runs from 6th April to 5th April.
Anglodan Tax Service
Anglodan
can assist in keeping the records of the income and expenses of the property
so as to have the correct amounts available for both the British tax return
and your local tax return (see Additional Services).
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