Expat Guide To Renting A UK Home

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Keeping a home in the UK makes sense if you are moving abroad as an expat for lots of reasons.

Ever increasing property prices make homes in the UK a good buy to let investment that generates an income, while having a bricks-and-mortar bolt-hole if you need to return at short notice gives peace of mind.

But owning a property comes with responsibility towards tenants, maintaining the building and paying tax on any rental profits.

Picking A Property Manager

Picking someone you can rely on to manage the property is the first factor to consider.

You can do this yourself remotely or this could be a friend, relative or letting professional.

Remote management across thousands of miles and different time zones is not easy unless you are very dedicated and don’t mind missing a lot of sleep.

Arranging tenant viewings, managing repairs and sorting out the rent are time-consuming tasks for friends or relatives to shoulder.

Working with a letting agent is costly – generally between 8% and 15% of the monthly rent plus VAT – but you should feel more relaxed that a professional is looking after your property.

Another plus from working with an agent is any stress is removed from mixing business with pleasure in personal relationships.

Looking After The Legals

Putting your property in the hands of a letting agent should cover the legal side of letting property, especially if the home needs a licence from the local council.

Other factors to consider include yearly gas safety inspections, electrical safety reports (EICR) and energy performance certificates (EPC).

If the property is a shared home, you must have a house in multiple occupation (HMO) licence and comply with strict fire, health and safety standards.

On the financial side, the agent will protect any deposit, which should be kept safely for the tenant by law.

Breaking any of these laws can lead to huge fines, so it’s just as well to leave them in the hands of a reputable property manager.

Tax On Expat Rental Profits

Any rental income from UK property an expat receives is considered as taxable in the UK.

The first £1,000 of rental income is tax free, and expats must declare file a self-assessment tax return if they earn:

  • Between £2,500 and £9,999 after deducting business expenses
  • £10,000 or more before deducting expenses

Non-resident Landlord Scheme (NRLS)

Landlords based outside the UK must register with HM Revenue & Custom’s Non-Resident Landlord Scheme.

Non resident for the scheme has a different meaning from non-resident for tax.

HMRC will consider someone who spends six months or more in a tax year as a non-resident landlord even if they are still tax resident in the UK. This would cover expats who live in Britain but spend several months of the year abroad.

If the rent is more than £100 a week, the letting manager – including a friend or relative – must deduct basic rate tax and pay the money on to HMRC. If there is no letting manager, the tenant must take on responsibility for deducting and paying the tax.

Landlords must confirm the figures by filing a self-assessment tax return.

Find out about Statutory Residence Test Explained For Expats

UK Mortgages For Expats

If you have a standard UK mortgage on the home you intend to rent out, you must tell your lender, or you could breach the conditions of the loan.

Some lenders will adjust the interest rate on a home that is rented out.

It’s a good idea to sort any mortgage arrangements before leaving the UK as you may have to switch to an expat loan once you are overseas.

Many mainstream and specialist lenders offer expat buy to let mortgages but expect to pay more than standard rates.

Insuring Your Home While Abroad

Standard home insurance will not offer the broader cover most landlords need.

Specialist buy to let insurance is a must.

This cover will offer protection for landlord contents, like white goods and furnishings as well as buildings insurance.

Add-ons include legal cover to help with evictions, rent guarantee that pay when a tenant is in arrears and home emergency assistance, like calling a plumber to deal with leaks.

Having adequate buildings insurance is typically a condition of any UK mortgage, so failing to arrange cover is a breach of the loan conditions.

Don’t Forget Foreign Exchange

Don’t forget to consider the cost of switching any rental profits to the currency you spend where you live.

UK banks tend to want customers to be UK resident, so check with your bank or building society about this before you go as you will need an account for collecting rents and paying any bills in the UK.

Shop around for the best exchange rates. A specialist foreign exchange bureau is likely to charge less for transfers than a bank. Many will offer better exchange rates as well.

Tax Issues For Expats

Besides income tax on rents, expats need to be aware of extra taxes if they buy or sell a UK home from overseas.

Stamp duty

Any home that is not a main residence is considered an additional home by HMRC.

Stamp duty is payable on the purchase of an additional home at 3% above the rate a buyer based in the UK will pay – so there’s no zero-rate threshold and the base rate is 3% rising through 5% for a home worth between £125,000 and £250,000 to 15% for a property valued at £1.5 million or more.

Capital gains tax

Expats pay Capital gains tax at the same rates as UK taxpayers – 18% for basic rate taxpayers and 28% for expats paying tax at the higher rate. Property disposals must be reported within 30 days of completing the handover of ownership.

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