Paying UK tax on your buy-to-let investment whilst living overseas

If part of your expatriation plan was to purchase a buy-to-let British property and use the rental income to supplement your pension, you need to factor in the UK taxman’s share of your good fortune.

It’s beginning to seem that, wherever in the world British expats settle, there's no escaping from the claws of the HMRC For expats living and working long-term overseas who’ve saved hard for their retirement and are hoping to pad out their meagre UK state pensions by means of a UK buy-to-let investment, there’s no getting away with paying no UK tax on rental gains. Your letting agent or, should you not be using an agent, your tenant, must operate HMRC’s non-resident landlord scheme, in which they must deduct the basic tax rate from rental receipts before passing the remainder on to you. The single break is that the tax paid can be deducted from your annual tax bill - but if you’re not paying tax on your state pension or other income you’re stuck.

The only way for you, your agent or your tenant having to act as unpaid tax collectors is to have an agreement with HMRC that tax at source does not need to be raised. However, this doesn’t mean no tax is due, as you’ll have to include the amount in your annual tax return. Either way, the taxman gets his due and there’s no guarantee HMRC will accept your request to pay at year end. Letting agents are normally clued up to calculate and pay the tax due, but tenants are another m

Reasons for not allowing an annual payment include incorrect information on application or the decision that the absentee landlord is unlikely to comply with the regulations. The only way out of this bothersome regulation is to have sufficient personal allowances to offset your tax liability or to charge less than £100 a week rent. Rentals below this level don’t involve either tenants or agents in becoming unofficial tax collectors for HMRC but, given the cost of renting a property in the UK’s popular regions nowadays, it’s unlikely to affect the majority of expat investor landlords living or working overseas.