Overseas Rental Income (UK Expat)

[avocadotoast]

Hi all,

In November 2021 a friend (who lives in the UK) and I started renting out our jointly owned property (UK) and I would like to understand how to handle the tax implications of this.

Firstly, some background about myself:

- Have been in lived in Japan for over 5 years
- Standard company employee
- Property is jointly owned (50/50) with a shared mortgaged
- First time ever doing a tax return

And the questions I have:

1. Do I need to declare anything in the UK, or only my Japanese tax return?
2. As the property is jointly owned, I assume the net rental income is simply divided by 2?
3. Can I deduct the cost of flights back home last month? How about other related expenses (train tickets, taxis etc.)?
4. For anything that is deductible, do I need physical receipts?
5. Are there any good resources online about this topic?

I'm sure more questions will come to me later, but hopefully, this is enough to get started.

Thanks in advance for any replies

[eyeswideshut]

1. Do I need to declare anything in the UK, or only my Japanese tax return?
2. As the property is jointly owned, I assume the net rental income is simply divided by 2?
3. Can I deduct the cost of flights back home last month? How about other related expenses (train tickets, taxis etc.)?
4. For anything that is deductible, do I need physical receipts?
5. Are there any good resources online about this topic?

I own rentals in Canada but I assume the situations are relatively equivalent. Rental income needs to be declared in Japan and is a separate line item in your annual tax filing (確定申告).

1. Do I need to declare anything in the UK, or only my Japanese tax return?
This will depend on what your tax status is in the UK. I am a non-resident Canadian for tax purposes so I have to declare and pay withholding tax on income earned from my rentals (less expenses). I also pay property taxes. The tax I pay to Canada is a deductible expense for the purpose of Japanese taxes.
2. As the property is jointly owned, I assume the net rental income is simply divided by 2?
Your net income is what you actually receive in payment from the tenant during the tax year less allowed deductions.
3. Can I deduct the cost of flights back home last month? How about other related expenses (train tickets, taxis etc.)?
Maybe yes to all of those if they are reasonable for managing the properties. It seems to be a kind of fuzzy area as to what is reasonable.
4. For anything that is deductible, do I need physical receipts?
You only need to show actual receipts if you are audited. If you have the physical receipts you should keep them.
5. Are there any good resources online about this topic?
Not that I am aware of but if you can read Japanese then search the NTA's website as there are easy to read explainers on the rules. I use an accountant because I suck at math and am worried about making a mistake.

Anyway, you really need to do your own research or talk to a professional but hopefully the above at least helps give you some guidance.

[goodandbadjapan]

I think you do actually need to declare rental income in UK even if you are non-resident. Think you can do it online by self assessment and bear in mind that you likely have your full personal allowance anyway so you would have to be getting a rental income of over about 11k a year before you were due to actually pay anything (if you have no other UK income that you have to declare). There is a bit about it here: https://www.gov.uk/tax-uk-income-live-abroad/rent

[Wales4rugbyWC23]

Hi all,

In November 2021 a friend (who lives in the UK) and I started renting out our jointly owned property (UK) and I would like to understand how to handle the tax implications of this.

Firstly, some background about myself:

- Have been in lived in Japan for over 5 years
- Standard company employee
- Property is jointly owned (50/50) with a shared mortgaged
- First time ever doing a tax return

And the questions I have:

1. Do I need to declare anything in the UK, or only my Japanese tax return?
2. As the property is jointly owned, I assume the net rental income is simply divided by 2?
3. Can I deduct the cost of flights back home last month? How about other related expenses (train tickets, taxis etc.)?
4. For anything that is deductible, do I need physical receipts?
5. Are there any good resources online about this topic?

I'm sure more questions will come to me later, but hopefully, this is enough to get started.

Thanks in advance for any replies

I actually also share a buy to let with another person in the UK but it does not have a mortgage. In answer to your questions

1. Have to do both UK and Japanese tax return. Are you letting it through an agent if you are, they have to register you with HMRC this does means though that you can get the rent gross.

2. Rent is split in half

3. On the whole Japan is more generous to business expenses, but it is best to talk to a Japanese accountant. I put one flight a year against my rental income. I am not so sure how this would be viewed by HMRC. However, the big difference now is mortgage interest being a business expense. In Japan it is allowable but in the UK they stopped about two years ago- very annoyingly.

4. I have kept all my physical receipts

5. I think there have been a few posts up on this Retire Japan site.

Any other questions then just ask away....

[avocadotoast]

Huge thanks to all for your replies - they've been very helpful.

I actually also share a buy to let with another person in the UK but it does not have a mortgage. In answer to your questions

1. Have to do both UK and Japanese tax return. Are you letting it through an agent if you are, they have to register you with HMRC this does means though that you can get the rent gross.

2. Rent is split in half

3. On the whole Japan is more generous to business expenses, but it is best to talk to a Japanese accountant. I put one flight a year against my rental income. I am not so sure how this would be viewed by HMRC. However, the big difference now is mortgage interest being a business expense. In Japan it is allowable but in the UK they stopped about two years ago- very annoyingly.

4. I have kept all my physical receipts

5. I think there have been a few posts up on this Retire Japan site.

Any other questions then just ask away....

Wales4rugbyWC19 would love to learn more considering how similar our position is. Apologies in advance for being such a novice.

1. Yes, we're letting it through an agent. Is this something we need to request, or would it have been done automatically? If it's not automatic, what does registering with the HMRC means for me and my friend?

2. I assume shared expenses, for example, mortgage interest and repairs would also be split in half?

3. Interesting. It's likely I would only take one flight a year anyway. I'm assuming I wouldn't split this expense in half? I wonder if I could also expense my taxi fare from the airport this year? I didn't know mortgage interest was no longer deductible in the UK .

One more question - do you do an online self-assessment in the UK? The link (https://www.gov.uk/tax-uk-income-live-abroad/rent) shared by goodandbadjapan seemed a little confusing about whether or not this can be done online.

[Wales4rugbyWC23]

Huge thanks to all for your replies - they've been very helpful.

I actually also share a buy to let with another person in the UK but it does not have a mortgage. In answer to your questions

1. Have to do both UK and Japanese tax return. Are you letting it through an agent if you are, they have to register you with HMRC this does means though that you can get the rent gross.

2. Rent is split in half

3. On the whole Japan is more generous to business expenses, but it is best to talk to a Japanese accountant. I put one flight a year against my rental income. I am not so sure how this would be viewed by HMRC. However, the big difference now is mortgage interest being a business expense. In Japan it is allowable but in the UK they stopped about two years ago- very annoyingly.

4. I have kept all my physical receipts

5. I think there have been a few posts up on this Retire Japan site.

Any other questions then just ask away....

Wales4rugbyWC19 would love to learn more considering how similar our position is. Apologies in advance for being such a novice.

1. Yes, we're letting it through an agent. Is this something we need to request, or would it have been done automatically? If it's not automatic, what does registering with the HMRC means for me and my friend?

2. I assume shared expenses, for example, mortgage interest and repairs would also be split in half?

3. Interesting. It's likely I would only take one flight a year anyway. I'm assuming I wouldn't split this expense in half? I wonder if I could also expense my taxi fare from the airport this year? I didn't know mortgage interest was no longer deductible in the UK .

One more question - do you do an online self-assessment in the UK? The link (https://www.gov.uk/tax-uk-income-live-abroad/rent) shared by goodandbadjapan seemed a little confusing about whether or not this can be done online.

1. Yes if you are collecting the rent gross your agents 'have' to tell the HMRC or they are not doing their job properly. You will receive a letter from the HMRC to confirm that they have been told that you are receiving the rent gross.

2. As for repairs it really is up to you and your fellow owner how you share them.

3. I share the expenses for ground rent, agency fees, insurance and repairs with the other guy I co-own with. Agency fees is done automatically. The co-owner lives in the UK so he can have a look at any major repairs if they need doing.

4. Yes I do an online self assessment-surprisingly easy which I do through a gateway account I believe it is quite difficult for non-residents to do now and you might have to do a paper tax return.