Moving abroad? Life is unpredictable at the best of times, so renting your property out whilst you’re gone may sound like a good idea. And it could be, bearing in mind you do your homework before you leave.
There are more overseas landlords now than ever before, it’s not all international investors purchasing buy to lets in the UK to make a few quid. There are plenty of UK nationals that have chosen to uproot their lives, whether temporary or permanent, and leave their once called ‘home’ in the hopes a tenant will look after it as well as they did.
I have a mortgage!
Firstly, if you have a mortgage, you should be contacting your provider to have a discussion on what your intentions are, after all, they do have financial interest in your property. Don’t assume you’ll be able to rent your property out with a traditional mortgage, it could land you in big problems with examples such as being asked to pay huge sums in fees, or even worse, your home being repossessed. In most cases your provider will work with you, to offer you a buy to let mortgage or give you a consent to let.
Do I pay the tax man?
Most overseas landlords will be considered as ‘Non-Resident Landlords’, and as such are liable for paying tax on rental properties in the UK. Usually, a letting agent or tenant will deduct this before you receive the payment.
Using an Estate Agency
As an overseas landlord using an estate agency, you’ll have to comply with HMRC’s Non-Resident Landlords Scheme. It is usually applicable if you live abroad for more than 6 months of the year. The scheme was introduced in 1996 by the HMRC to ensure UK estate agents deduct the basic rate tax from rents they collect for overseas landlords. Ensure you are transparent and honest with your agency on where you live for most of the year. Tenants, landlords and estate agents that don’t comply could be liable for hefty fines!
Privately Renting Overseas
If you decide to rent your property out yourself, or with help from friends or family. The liability then falls on the tenant to declare to HMRC the amount of rent they’ve paid annually. Most landlords will use an estate agent to avoid passing this responsibility to their tenants.
However, bear in mind that tenants that pay £100 or less per week in rent directly to landlords, don’t have to withhold tax.
What if I’m living overseas permanently? (Over 6 months)
An NRL Scheme exists where an NRL1 Form can be completed and submitted to HMRC for their consideration. It’ll tell them the information they need to know to make a decision for your circumstance. This procedure is to make the process of renting out a property simpler, it’ll mean the letting agent or tenant won’t have to deduct tax to pay to HMRC and can usually be backdated to the start of that quarter.
So where do I stand with my next tax return with an NRL1?
If you receive a tax return, simply declare the relevant information including your rental income, regardless of whether you’ve paid any tax on it. There will be some circumstances that you won’t need to complete a tax return, HMRC will inform you whether this is the case.
Definitely! Ensure you have a UK correspondence address for the tenant or estate agents to have a clear line of communication with you, with a friend or family that relays the information to you swiftly. It ensures there is no interpretation that they cannot get a message to you, as it may lead to your tenant hastily choosing to stop paying rent.
Your UK based property will obviously receive rent payment in Sterling currency. A factor to bear in mind would be the fluctuation in currency, it could mean your income will vary from one month to another. This is ultimately down to the strength of the pound, if you rely on a certain income to cover expenses it would be useful to utilise a UK bank account to receive this money into. It’ll avoid international transfer fees as well as other perks to help manage potentially fluctuating currencies.
Of course, managing the property yourself seems harmless and the cheapest option, you’ll need to consider the potentially stressful situations, and weigh up whether its worth your time and effort whilst you’re abroad. Also, don’t forget the time zone differences, I’m sure the last thing you want are calls at 4am!
Some choose to have friends and family in the UK to ease the burden but renting a property out is a minefield of both tenancy and safety regulations, with potentially costly pitfalls if you have to foot the bill for a fine. It is usually best to instruct an agent to deal with the management of the property.
Finding a suitable agent should be a thorough process, after all, they’ll be looking after your pride and joy! Online reviews, testimonials, and generally checking their presence and quality of content is always a good starting point. Also, communication is key, especially whilst you’re out of the country. Reviews based on their communication would be best looked out for, to see if their existing customer base rates their ongoing feedback. Listing your questions to ask the potential agents will give you a good perspective on how they conduct their business.
- How they qualify the tenants.They should inform you of the ins and outs of what they ask for, what checks are conducted etc. You probably won’t be around to meet the applicants so relying on your agent for this stage will be important.
- It will usually be at a cost, but how often they will inspect the property.Ensuring your agent maintains consistent contact and conducts periodic inspections will allow peace of mind that your property is being well maintained. Ask for a documented report, complete with photographic evidence, recorded for your attention whilst you’re away.
- About how they deal with maintenance.A reputable and reliable agency will usually have trusted contractors that are good at what they do. Allow the managing agent to utilise these resources for your gain, if any issues arise with your property.
If you’re a first-time landlord, there will be associated costs to ensure your property is suitable to be put on the market for tenants, there is a lot of tenancy and safety legislation to be factored in. However, a good managing agent should be able to guide you through this. Take a look at ourCosts for a First Time Landlord Guide.
The rental market is doing very well right now, so there is a good chance that there will be little void period before or between tenancies. However, this is no guarantee, and precautions should be taken to ensure a contingency fund is in place. It’ll provide some reassurance whilst you’re away without the last-minute panic to find the funds.
Finally, the thought at the forefront of your mind is probably ‘I hope they don’t trash the place’.Unfortunately, there is no guarantee that you’ll have well-maintaining tenants, the most you can do is try your best to set yourself up for success.
Ensure before handing keys over to the managing agent, you’ve done everything you can to leave the property at a good standard. Painting or wallpapering to a neutral finish, general tidy-up, leaving the garden and green spaces cleanly trim and tidy. This will set a standard from the get-go of what you expect and will hopefully instil a level of standard with your tenant, of how it should be left at the end of their tenancy.