Do you know that expats can earn tax-free rental income from the UK?

Boost your income with UK property investment

If you’ve moved overseas or are considering doing so, one of the things that might concern you is how your income is taxed. A lot of countries around the world have higher personal tax rates and lower personal allowances than the UK. The lower cost of living which is so attractive could be outweighed by lower wages and higher taxes.

UK expats and overseas investors have the opportunity to benefit from the prospects for UK property investment in 2017 and beyond. Property investment also provides a connection to the homeland. What most expats don’t realise, and best of all is that you could get up to £11,000 of tax-free income from an investment in UK property. For a couple, that’s £22,000 per year.

The benefits of expat investment in UK property

I know a lot of expats who work hard in their chosen countries. They’ve sold up in the UK, transferred their money abroad, and it’s sitting in the bank. Their income from work, and the interest they get on their savings are all taxed.

They’re left with barely enough to live on. While the sunshine and more relaxed way of living has its benefits, it’s not quite the life they were hoping for. Plus, every year that their money is held in the bank it risks losing spending power.

What most expats don’t realise is that if they used some of their savings to invest in UK property, they could:

  • Keep a foothold in the UK
  • Benefit from capital growth in one of the best property markets in the world
  • Receive tax-free income, as if they were living in the UK

Imagine the difference £22,000 of tax-free income could make to a couple living abroad. That’s income that doesn’t have to be worked for, either. With that sort of passive income, an expat couple really could have the lifestyle they aspire to.

Five steps to passive, tax-free income from property investment in the UK

If you’re living abroad, investing in UK property can be daunting. It doesn’t have to be, and with the right process, you could soon be receiving monthly rental income of more than £900 each, completely tax-free. Here are the five basic steps for expats to follow and get tax-free rental income:

1.      Find a property

Buy in the best places to invest in property UK. You’ll need to invest with strong property fundamentals:  shops, schools, transport links, major employers and major investment. It should ensure that your investment property is in demand from both buyers and tenants. It’s this demand that produces growth in value, and steady and rising rental income.

2.      Obtain financing and complete on the property

Take advantage of a great buy-to-let mortgage broker, and get the best financing you can (if you need it). It will give you the advantage of the benefits of leveraging in property investment. You’ll earn income and the capital gain on money that isn’t yours. Using other people’s money to invest is how the best buy-to-let property investors build portfolios worth millions.

With the financing arrangements in place, you’ll be ready to complete the purchase. Of course, you might decide to invest in off-plan property. Your starting capital will be less, and you’ll start benefiting from any growth in UK property prices straight away.

3.      Benefit from investment property management

Living abroad is no bar to profitable property investment in the UK. You don’t have to be on hand 24/7 to deal with rent, repairs, and maintenance issues. You don’t even need to find your tenants. The key is to take advantage of professional investment property management. They’ll make sure your property is well-maintained, and your rent is collected on time. You’ll be kept in the loop, of course; but you won’t have to worry about the day-to-day business of being a buy-to-let landlord.

4.      Apply to receive your rent without tax deducted

Now that you invested with a Set and Forget strategy, you need to tell the taxman you want your rent paid gross of tax.

The law says that your investment property management company (or letting agent) must operate the non-resident landlord scheme (NRL). Under this scheme, basic rate tax will be deducted from the rent before it is paid to you. This tax is then offset against your personal tax liability at the end of the year. (Note that if you deal directly with the tenant, the tenant will deduct the tax.)

You can apply to HMRC to have your tax paid gross. When you complete your annual self-assessment, you then simply include the rental income on your tax return. If you have no other income in the UK and your rental income is below the personal allowance, then you won’t pay a penny in personal income tax.

With a personal tax allowance of £11,000, an expat couple living overseas who invest on a joint basis could receive £22,000 in tax-free income.

5.      Sit back, relax, and review your investment regularly

Finally, sit back and relax. Work a little less, and live a little more. With the kind regards of the UK taxman. Not something you’ll hear every day of the week!

The only work you need to do is to make sure you complete a self-assessment (an accountant could do that for you) and review your property investment on an annual basis.

Want to know more?

If you’re like me, you’ll like the idea of maximising your income, capital gains, and your time. You’ll also like the idea of minimising the tax you pay, and the hard work you do to pay it.

We’ve helped hundreds of expats and overseas investors achieve their lifestyle goals through investment in UK property. Contact one of our team today on +44 (0)207 923 6100, and you’ll have taken the first step to doing the same. We’ll help you with your property search, explain all the costs that can be deducted before calculating your tax-free income, and explain the UK property tax system in more detail. Just because you live in Spain, or Greece, Singapore, or Australia, there is no reason why you shouldn’t benefit from UK property investment.

Live with passion

Brett Alegre-Wood

Brett Alegre-Wood
February 22, 2017

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