The ultimate expat guide to paying UK tax on rental income via Self Assessment

A reported 5.5m expat Brits live overseas, a third of them in Australia, 28% in the USA or Canada and 25% live elsewhere in Europe (most in Spain or France). About a quarter of expat Brits…

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Last Updated: 3rd April 2024

A reported 5.5m expat Brits live overseas, a third of them in Australia, 28% in the USA or Canada and 25% live elsewhere in Europe (most in Spain or France). About a quarter of expat Brits are more than 65 years old, with many having relocated to sunnier climes post retirement.

Many expat Brits are able to cover their overseas living costs thanks to income they receive from renting out UK property. You may have just moved overseas to live or plan to do so one day. Perhaps you have recently rented out or plan to rent out your UK property to provide you with income. If so, tax is a key consideration. You should know your tax obligations as an expat Brit earning taxable rental income from UK property. This guide has been written to give you a handy overview.

Do you need to tell HMRC you’re leaving?

You must tell UK tax authority HMRC if you’re leaving the UK to live abroad permanently or going to work overseas full-time for at least one full tax year (6 April to 5 April).

  • If you don’t usually complete a Self Assessment tax return, you fill in form P85 to inform HMRC. Self Assessment is the system HMRC uses to collect Income Tax from landlords, sole traders and others.
  • If you usually complete a Self Assessment tax return, you can complete an SA109 supplementary page to let HMRC know you’re leaving the UK. You can’t do this online; you must either post a hard copy, use commercial tax return-filing software or get assistance from a UK accountant.
  • You must also tell HMRC if you move back to the UK to live.

Need to know! If you’re non-resident in the UK, you don’t pay UK tax on income or gains that you receive from outside the UK.

What about National Insurance?

You might be able to pay National Insurance contributions (NICs) while you’re living abroad if you’re planning to come back to the UK and/or later claim the UK state pension. You can claim the UK state pension while living permanently abroad, but only if you’ve paid enough UK NICs to qualify.

Need to know! You can’t claim back any NICs that you’ve paid in the UK if you leave to live somewhere else permanently, but NICs you’ve paid may count towards benefits in the country you’re moving to if it has a reciprocal social security agreement with the UK.

Is tax payable on UK rental income?

If you’re an expat earning income from property or land that you rent out in the UK, often it’s subject to UK Income Tax. Much depends on how much rental income and other income you receive.

You can either pay the tax yourself via Self Assessment after collecting all of the rent or (under the Non-resident Landlords Scheme) your tenant (if their rent is more than £100 a week) or letting agents can deduct the tax and pay it to HMRC on your behalf and pay you the balance. The latter is more common with landlords living outside of the UK, and you’ll be given a certificate at the end of the tax year stating how much tax has been deducted, which will help you when you’re completing your Self Assessment tax return. 

If you want to pay tax on your rental income via Self Assessment, you apply by filling in form NRL1i. If HMRC approves your application, it will tell your letting agent or tenant not to deduct tax from your rent and you’ll need to report all of your rental income via a Self Assessment tax return. Warning: HMRC won’t approve your application if you have a history of being late with your tax returns or tax payments.

Need to know! As an expat, you may need to pay Capital Gains Tax if you make a gain after selling property or land in the UK. No National Insurance is payable on your rental income, if you’re a private landlord, and you don’t need to register for VAT either.

Registering for Self Assessment as a landlord

Thanks to the property allowance, you don’t need to pay tax on the first £1,000 of rental income. A word of warning, though. If you claim the property allowance, you cannot also claim “allowable expenses” (more on these later), so you’ll have to work out what is more tax efficient for you.

  • If your annual total rental income is between £1,000 and £2,500, you must contact HMRC and you’ll be told how to report it.
  • If your total annual rental income is £2,500-£9,999 after allowable expenses have been deducted or £10,000 before they’re deducted, you must report it via Self Assessment.

Need to know! You register for Self Assessment. If you don’t already file a Self Assessment tax return, you must register by 5 October following the UK tax year (s April until 6 April) in which you earned taxable rental income – otherwise you can be fined.

How to file your Self Assessment tax return

Unless HMRC tells you not to, you must declare your taxable rental income via a Self Assessment tax return, which you submit to HMRC. Problem is, as an expat living overseas, you cannot use HMRC’s online tax-return-filing services. You have three options.

  • The first is to fill out and post a paper tax return to HMRC. Very few people still submit a paper Self Assessment tax return. They must be filed three months earlier (before midnight on 31 October) and although HMRC provides guidance on completing Self Assessment tax returns, if you lack experience, you’re more likely to make mistakes.
  • Another option is to use third-party commercial Self Assessment tax-return-filing software. It’s relatively cheap, with prompts saving you time, hassle and possibly money, because you’re told exactly what information you need to enter and where. It can really make the whole process much easier.
  • Your final option is to get a UK-based accountant to sort out your Self Assessment tax return for you. It’s the easiest option; their advice and expertise should ensure success; but, obviously, you’ll need to pay their fees, which will be more than doing it yourself with tax-return-filing software.

Need to know! Each year, the Self Assessment online-filing deadline is midnight 31 January. Miss it and a £100 fine is immediately payable. After three months, the fine goes up.   

What Self Assessment forms must you complete?

You must fill out and file the main Self Assessment tax return (the SA100), as well as the residence supplementary page (SA109) and the UK property (SA105) supplementary page, summarising your total UK taxable rental income and any allowable expenses you want to claim. Then HMRC will have the information it needs to work out your tax bill. Once calculated, HMRC will tell you how much tax you owe.

What records should expat UK landlords keep?

Landlords must maintain accurate records of dates when their property is rented out, as well as all rent and associated payments (eg maintenance charges) received, rent books, bank statements, and receipts/invoices as proof of things claimed as allowable expenses.

Need to know! Failure to keep accurate, complete and legible records can lead to an HMRC penalty charge, as can an inaccurate Self Assessment tax return. You must keep your records for one year after the 31 January tax return deadline for each tax year (ie 22 months from the end of the tax year).

How much tax will you pay on your rental income?

Any “allowable expenses” will be deducted from your total rental income and once your tax allowances and any other taxable income accounted for, HMRC will work out how much tax you owe, guided by the figures you’ve entered in your Self Assessment tax return.

If you rent out more than one UK property, the taxable profits from all are added together and then HMRC works out your tax bill. The greater your total taxable income, the more tax you’ll pay.

You’ll be taxed according to the Income Tax band you fall into after your total taxable income has been calculated. The Income Tax band tax rates for the 2024/25 tax year are:

BandTaxable income    Tax rate
Personal Allowance   Up to £12,5700%
Basic rate £12,571 to £50,27020%
Higher rate£50,271 to £125,14040%
Additional rateOver £125,140
45%

The Personal Allowance decreases by £1 for every £2 of net income over income of £100,000 and if your net income is £125,140 or more you don’t get the Personal Allowance. Income Tax bands and rates are slightly different in Scotland.

Need to know! If you own UK rental property with others, your share will determine your tax liability . So, if it’s 50%, you’ll be taxed on half of the taxable rental income for the UK property. If a married couple or civil partners living together jointly own a UK property, income is usually split and taxed 50/50, unless you can prove unequal ownership to HMRC.

What tax expenses can overseas landlords claim?

HMRC allows you to deduct many costs (“allowable expenses”) from your rental income, as long as they result “wholly and exclusively” from renting out your UK property. Where there is mixed usage (eg your mobile phone), you can claim part expenses, as long as you reliably work out what proportion of the total cost was property-related.

Allowable expenses for landlords can include:

  • property maintenance and repairs (eg replacing windows or roof tiles)
  • ground rents and service charges (if applicable)
  • redecorating between tenancies
  • insurance (eg building, contents and public liability)
  • water rates, council tax, gas and electricity (if you pay them, rather than your tenant)
  • gardening and cleaning costs
  • letting agent fees/management fees
  • legal fees for lets of a year or less (eg for legal advice about pursuing unpaid rent, etc)
  • accountancy/bookkeeping fees
  • direct costs (eg phone calls, stationery and advertising for new tenants)
  • costs for disposing of old items of furniture or electrical appliances, etc.

If you rent out a furnished or part-furnished UK property, replacing furnishings or equipment cannot be claimed as an allowable expense. But you can claim Replacement Domestic Items relief if you replace a sofa, bed, carpets, curtains, white goods, crockery, cutlery, etc. You can only claim the value of a like-for-like replacement, not the difference if you buy something of superior value.

Improving a property, by building an extension, for example, isn’t an allowable expense, because you’re increasing the property’s value by making a “capital improvement”. You may later be able to claim capital expenses against Capital Gains Tax if you sell your UK property, so keep a detailed record of costs and proof of purchase.

Need to know! You can’t claim mortgage capital repayments as an allowable expense. Before 2017, you could deduct mortgage interest and other finance costs such as mortgage arrangement fees from your rental income to reduce your Income Tax bill, but now you receive a 20% tax credit. Also be aware that you may need to seek permission from your mortgage provider before renting out your UK property.

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Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.

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