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moving abroad and letting house- what to consider?(19 Posts)
We are thinking of either selling or letting our house as we'll be moving abroad. In our new country, we will be renting for the first year or so until we are sure that this is a long term move. If we sell now we will have a lot of money sitting in the bank and the pound/euro exchange rate isn't favourable (who knows it might get worse with Brexit). We have paid off two thirds of our mortgage.
Is anyone else letting a property from abroad? I would be very grateful if you can tell me about all the things we need to consider. This is what I found so far:
1. We are with HSBC. I need to ask them if we can move our mortgage to a BTL mortgage. We are still another 2 years on a fixed interest rate. What costs should I expect?
- I read that we will have to pay 20% tax on the rental income. Is that correct?
-What can we deduct from it?
-Is there an allowance if we are non residents? We are EU citizens but have PR in the UK.
- What if tax on rental income is higher in our new country? Do we just pay the difference in the new country? There is a double taxation agreement in place).
3. Other things: Get a gas certificate and a buildings insurance for BTL. How much are those approximately?
4. How much does it cost for an agent to manage our property?
5. Will we have to pay capital gains tax if we sell our house in 1-2 years?
6. Anything else that I have forgotten?
Sorry, for all the question. I hope someone else has been in a similiar situation. Thanks so much!
We do this, we use a full service letting agents, time differences mean that it would be awkward to manage it ourselves even if we wanted to.
We pay about 10% fees.
We are Hsbc, we asked for permission to let, don't have to change mortgage for first couple of years.
Landlord insurance was about same cost as our previous insurance.
There is a batch of paperwork needed, our letting agents made sure we had it all.
You don't pay tax on income but profit, pay for proper tax advice.
We were told we would be liable for CGT, though if market crashes that won't be such an issue!
Same as midges - I especially second getting good tax advice. We don't currently pay any tax because we don't make a profit (high ish mortgage plus deductables such as letting agent fees mean we aren't clearing anything each month) but we both have to submit a tax return each year (don't forget that tax accountant fees are one of the deductables on your tax return)
Try to get longer term tenants, to minimise void periods and the costs you incur with new tenants
Get a couple of local agents around to discuss your potential tenants and rental incomes
you need insurance for buildings, your contents, legal expenses, malicious damage, home emergency and rent guarantee - tenants can move in and pay no more until evicted months later,or stop paying at any time.
yes, cgt liability if it isnt your residence. no, no tax allowances for non residents.
whole place needs to be working properly, all your stuff out.
if planning to sell in two years, dont risk rental and sell now.
It's really not too complex. Definitely request permission to let from your mortgage company, this was very straightforward, so no need to change your mortgage.
Absolutely use a letting agent. Get a few quotes before you sign up but go for the one who have good local reviews and you have a good rapport with not just the cheapest.
Yes the house needs to be in good working order. Sometimes you can leave some of your furniture there, we have left a few large bits and there was no issue with this.
Insurance is straight forward and not that expensive. I just phoned my home insurance company and got them to switch me to landlords insurance.
Gas certs etc the letting agent will sort out and either bill you for or deduct from first months rent.
British Gas landlord home care is worth getting as it's very cheap but covers you for any boiler/pipes issues etc.
A good letting agent will also get a third party inventory company in to make a huge document on every single scratch, mark, dent throughout the house. This is good to refer to when it comes to the tenants moving out. It cost money but is worth it in my opinion.
We live in the US and are considered non-resident for tax purposes so we don't pay tax on the income. Not sure if this is the same everywhere though. DH company also has a tax equalisation policy and we get tax advice for free through them so worth checking out if you get similar as I believe it is common place.
be very careful with standard landlord policies. most exclude malicious damage by tenants and illegal activity. rent guarantee always costs extra and needs tenants that pass vetting.
small odds but big costs if you get unlucky.
Use a full service agent, they will find and manage the clients as well as the property. They will also take the tax required to be paid at source from your rental income, you will need to fill in a form with them about being an overseas landlord. Any decent one will be used to it.
I can't remember the costs involved for the agent, it's not huge.
As for tax, you need an advisor, as until you've broken residency you are under current rules, then a second set when you've broken residency, you'll be liable for tax on any earnings in both countries in either instance. You'll also want to maintain bank accounts etc here. We did.
You pay tax to the government of the country you earn it in only. Breaking residency is quite complex, the British government sees you as resident every day you're in rhe country at midnight, and it's based on tax years, so dependent on when in the year you move, and how often you need to come back it could get complex.
I would keep the house and rent it out.
As said an agent will do the overseas landlord tax for you, but you'll have other considerations like interest on savings etc.
https://www.gov.uk/guidance/paying-tax-on-rent-to-landlords-abroad Non resident landlords scheme, you should only pay UK tax on the income but some countries will also tax the asset value. A letting agent can make any deductions before passing on the rent to you. British Gas et al run a letting policy to cover boiler, ch and emergencies which would include the annual service certificate. Unless you have someone living nearby willing to manage it for you 24/7 it is worth engaging an agent to deal with day to day issues, deposit and tenant finding.
Whilst the property isn’t rented you will need to pay council tax at 100% in most districts, very few districts give any free time. Although a managed property, the agent should do this - often it gets left and with LL abroad can escalate to bailiff quickly. You need to be on top of this each time a tenancy ends and give council your address abroad and email to send bill. If you have a gap between tenancies of three days or three weeks you can then make sure you pay to
Mortgage is no longer deductable for tax relief I believe.
We did something similar and are currently letting our our property in the U.K. while we are renting abroad. However, it's such a hassle. Stuff breaks, you need to pay fees for this, that or the other. I don't think we've been given the full rent amount once so far (estate agents sort out issues and then deduct it from the rent). We've decided to sell, which is sad because I really like our house. I'd like to go back to the UK in the not too distant future unless they won't let me back in after Brexit (I'm an EU citizen, DH is British).
I do think until they've got their stuff sorted we're better out than in, though. DH would get automatic residency in my home country due to being married to me. It also means we won't be tied to a particular area when/if we go back.
You can offset the cost of replacement stuff against your tax liability though, so it is a very cost effective way of keeping a home going, it is much cheaper than living in it ironically.
If you are unlikely to return get some paid for tax advice on when would be the best time to sell.
Look into whether you can still qualify for a UK mortgage (even a BTL one) if you reside / are domiciled in another country for tax purposes. When I last looked into it (which as 6 years ago so may be wholly different now) the only way I could get a mortgage was with an offshore arm of HSBC
The rules about getting an offshore/international arm of U.K. banks mortgage only apply if you are trying to get a new mortgage for a U.K. property if residing abroad. It won't be relevant if the OP retains her current mortgage.
OP, agree with other advice on here - go with a good, local letting agent who are well-established. We did that when working abroad and letting our house and they were worth their weight in gold. Incidentally, our mortgage lenders (Halifax) were brilliant and didn't require us to move to a BTL mortgage, which would have been expensive. HSBC (and Barclays) take a different view though according to friends who are with them.
Think very carefully before selling the house if it's one that you love and would be happy to return to. We found it a great source of comfort when we have had an outbreak of expat blues to know that we still had 'a home back home'. And you never know if things might not work out. Friends of ours sold their lovely home in a very desirable English city to take up a fantastically well remunerated contract in Saudi Arabia. After a couple of years the DH fell out with his employer as he thought some of their practices were dangerous (it was a company that trained airplane pilots) - company unceremoniously sacked him, without any compensation, and they were ordered to leave the country. He took time to get another job and they were left unable to buy the sort of house they had owned before because of the (then) rapidly increasing prices and Stamp Duty.
That said, you have a lot of equity so will be in a good position to purchase again in the future. However, having worked all over the world for many years, I think the best option is to rent out the property initially and give it a year to see how that and your new job works out. You could sell after that if you decide your move is going to be permanent. As my mum always says, when in doubt, do nout.
If you love your house, don't do it. We rented our house out when we moved to the ME, and it was an awful experience. No matter how referenced, inspected etc, it's highly unlikely they will treat your house as you would like. We sold ours in the end. It wasn't worth the stress and hassle.
We hosted the vists from prospective tenants ourselves. Then chose the family we liked best from all the applications. So glad we did this as several applicants were really grim. Our current tenants look after the house better than we did! They are a lovely family and they live our house - I think they would buy it from us if we ever sold!
The first year we paid the agent for full management (7%) but were happier using our own tradies (lots in our circle of friends) and giving the tenants their numbers to coordinate the work. From the 2nd year on we pay the agent 3% to collect the rent, deal with any lease issues (or rent increases), serving notice, statements of accounts.
We may stop using them altogether but we like knowing that we can ask their advice etc if we get into a tricky situation.
We have to do the gas safety check each year and if there are maintenance issues the tenants call/text/email us, we put them in touch with our tradesmen who bill us directly. We go back to the UK a couple of times a year and ask the tenants if there’s anything they need us to do and tend to pop in.
Tax returns are easy enough to do yourself too (I hate forms but managed fine!).
I second what Shmthcat says let our home last time we were abroad and vowed never again.
I’ve let my house out for the last ten years. The difference between me and you is that I left the uk to start a new life abroad with no plans to return. So even though I still love my U.K. house, it is no longer my home therefore when I see it, I view it completely differently. It is now an investment. I must admit the first time I did see it, a year or so after i’d left, it did upset me to see how much it scruffier it was compared to before.
I have an estate agency who manage it and pay 17% full management fees. They sort everything out eg smoke alarms, inspections, boiler etc.
I do a tax return in the U.K. but pay no tax as my profit is below
Sorry! Profit is below the threshold.
I live in France and my U.K. earnings are added on to French earnings so I do end up paying tax on it. (France taxes on world wide income).
I had to change my mortgage to reflect my new status as a landlord. It was of course more expensive than when I lived there.