Property FAQ

How to rent out your house

Renting out your house when you move abroad can be a very sensible idea. With ever increasing property prices in the UK, getting off the ladder can be a bad idea if you intend to return to the UK in the future.

Even if you have a mortgage, you can offset any monthly payments with rental income and not be subject to tax in the UK as a result.

If you are intending to rent your house out while living abroad, there are a number of key things you need to consider.

1. Research

If you've never rented before, you should research your local area to see current rental values, also research potential letting agents and finally research the rules around letting your property.

2. Mortgage options

If you have a mortgage, you will need to speak to your mortgage provider and potentially an independent mortgage adviser to understand what your options are, any potential costs and investigate whether you can switch to a buy to let mortgage.

3. Furnished or unfurnished?

You need to decide whether you want to offer your house as a furnished property, and if so wish items you intend to leave in your house. The other items which you are not planning to take abroad with you will need to be put into secure, long term storage. You will need to research the most cost effective ways of doing this. You may also wish to sell some items.

4. Tax considerations

When you rent your house, this will be classed as income and therefore subject to income tax. There are certain costs which can be offset against your income to reduce your tax liability, and you may have a personal allowance which means you can earn a certain amount before being taxed. However, if it is a UK property, you will have to complete a self assessment tax return. Your income may also be subject to income tax in your new country of residence. Therefore, before making any decisions you should speak to a qualified tax adviser.

If you decided to sell your house at any time, you may now be subject to capital gains tax as well.

5. Agent vs no agent

If you are moving abroad, it is sensible to find an agent who can manage the property and tenants in your absence. Managing this yourself may require regular trips to the UK which can be very expensive, whereas paying a professional to manage the property in your absence can reduce your stress and keep the costs to a minimum.

They will also be able to create a robust tenancy agreement, something which paying for a lawyer to do can again be very expensive.

6. Insurance

When you rent your house, it is important you have the correct landlord insurance in place. Your existing home and contents insurance will not be sufficient. This can be expensive so it is important to shop around.

What expenses can I claim against rental income?

If you are a tax resident in the UK or you live abroad and are renting a UK property and you earn between £2,500 and £9,999 after expenses - or you earn £10,000 or more in a tax year - you must report your income to the HMRC.

You will be required to pay tax on any profit made from renting out the property, less any deductions which are considered "allowable expenses".

Expenses you can claim against rental income

You should seek professional advice about your expenses to ensure that they are considered "allowable" before making any declarations, however, the following would typically be considered "allowable expenses" when renting a property:

Any agents’ fees
Your accountants’ fees
Interest on your mortgage or other property loans
Ground rent or service charges paid for the property
Any Council Tax which you pay
Landlord and/or buildings and contents insurance
Costs of any maintenance and/or repairs - although this does not include improvements
Any utility bills (eg. gas and water) which you pay for
Additional services, such as cleaning and window cleaning
Property specific travel (eg. if you have to travel to the UK to meet your tenants or letting agent)

Can foreigners buy property in the UK?

In short, yes, as a foreigner you can buy property in the UK, even if you do not live in the UK.

That said, buying property in the UK as a foreigner is easier if you are a cash buyer – i.e. do not need to apply for a mortgage or additional borrowing as it may be difficult to apply for such a mortgage.

Therefore, if you are looking to buy a property, it is important that you have a full understanding of the UK property market and have access to funds.

It is also important to remember that, while the pound is currently relatively cheap, property prices in the UK are still comparatively high, depending on the area.

However, if you can afford to buy a property outright, yields from rental income can be high, while property prices tend to rise.

Can I transfer my property to my partner to avoid Stamp Duty obligations?

Under the current world-wide circumstances, and the global pandemic reaping its effects throughout, this is a great question to be asking at this point in time.

This highlights one of the extremely few benefits to arise from the Covid-19 crisis.

Reasons for property transfer between married couples

There are a variety of reasons for transferring property from one spouse to the other. Some examples are:

Plans for separation or divorce
To reduce income/ Capital Gains Tax due to one spouse paying a lower rate of tax than the other
To provide security and a reassurance to both partners

Why act now?

On 8th July 2020, Chancellor Rishi Sunak announced a temporary holiday on Stamp Duty Land Tax on the first £500,000 of all homes sold in England and Northern Ireland.

Under the ‘usual’ circumstances (after the March deadline), the normal SDLT rules will apply, meaning that Stamp Duty Land Tax will again be charged depending on the type of transfer, marital status and other important factors and considerations.

But as it currently stands, until 31st March 2021, no stamp duty is payable between spouses as long as one party is not taking on more than £500k of the existing mortgage.

What else do I need to consider when doing this?

Thousands of people that have looked to take advantage of the Stamp Duty holiday have also felt a pressure to rush an important financial decision regarding something as important as property, due to the Stamp Duty holiday deadline.

It is crucial to make sure that you seek the appropriate professional advice when making changes to things as important as property transfer.

Speaking to a professional can also help you avoid making any costly errors, or missing any other related opportunities that come with a financial gain.