Losses
If your deductible expenses exceed your total property income in any year then you have made a loss. This loss is carried forward to set against future available rental profits (from any property). Rental losses cannot be offset against any non-rental income and they cannot be carried back. If you sell your property or your property income ceases for any other reason, unrelieved losses are lost.
Non-resident landlords
If you live outside the UK you will still have to pay income tax on profits from rental properties. The Non-Resident Landlord Scheme requires your letting agent to deduct basic rate tax from the rent that is collected on your behalf. You can apply to HM Revenue & Customs for approval to receive your rental income without tax deduction. This is requested by submitting a form NRL1 to HM Revenue & Customs stating your current tax situation and obligations. It will be granted if you do not expect to be liable to UK tax for the year in which you make the application and your UK tax affairs are up to date.
Jointly Owned Properties
At some stage you are likely to want to sell a property that has previously been rented out. Not surprisingly HM Revenue & Customs will want you to pay some tax, but how much and what sort of tax? Capital Gains Tax (CGT) is based on the profit or gain arising from the increase in value of the property during the period In special circumstances a different split can be used. This is when the property is owned in unequal shares and so income is divided in the same proportion. HMRC must be advised of the split via Form 17 with supporting documentation. Capital Gains Tax There are special tax rules for jointly owned property for married couples and civil partners. The rules mean that you can’t simply decide between yourselves how you want to be taxed or, for example, just give the rental income to the member of the couple with the lower income. The income must be split and taxed in equal shares (50:50).
of ownership. This is the difference between: Sale proceeds, less costs of making the sale and The original purchase price, plus costs of buying and cost of any capital improvements
It is therefore important to keep copies of all relevant documents at the time of purchase, as it could be many years until you sell. Similarly, any invoices relating to improvements carried out during the period of ownership should be retained. In straightforward cases the tax calculation is then easy to work out; start with the first figure and deduct the second figure. If this is the only Capital Gain you have in the tax year you can deduct your annual exemption (for 2019/20 this is £12,000). The resulting figure is then taxed at 18% or 28% (for the proportion of the gain that falls into the higher rate tax band). Many cases however are not so straightforward. A gain on jointly owned property is split between the owners in the relevant proportion and each part owner has their own annual exemption if applicable. Some exemptions will apply if you have lived in the property yourself. Different rules apply if a non-resident person sells UK residential property and specific advice should be sought as the disposal needs to be reported on a non-resident Capital Gains Tax return within 30 days of the sale.
Have you ever lived in the property or elected to treat it as your Principal Private Residence (PPR) ? If you have, the period that you lived in it as a proportion of the whole period of ownership is likely to be exempt from CGT. If there has been a period of residence at any time during the period of ownership, then the last nine months count as a period of residence. There is also relief available if periods of absence are for job related reasons. If the property was purchased before 31 March 1982 the original cost and capital improvements incurred before 31 March 1982 are replaced by the market value at that date. If you have losses arising from previous capital transaction you can offset the loss against the gain. other factors to consider are:
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