People considering a move overseas seldom consider how it might affect tax on their UK property assets. However, even relatively short-term moves could trigger a change of tax residency, which could lead to increased tax charges on earnings from UK property investments.
Since the pandemic, more people are choosing to flex their working arrangements and, in some cases, this has meant choosing to work from warmer climes in continental Europe, or exotic locations further afield. In many instances, these individuals don’t even change their UK-based jobs and therefore assume that their tax arrangements have not changed either, but this is unlikely to be the case.
The country which has the primary right to tax a person’s worldwide income (not just property income) is usually determined by where that person is tax-resident. Unfortunately, tax-residency is a complicated topic and although it is usually based on the number of days a person spends in a particular country, different countries assess this in different ways, meaning it is possible to be tax-resident and therefore have to pay tax in both the UK and another country at the same time.
Even when an individual spends very little time in the UK and loses their UK tax-residency, profits arising from UK property will always be subject to UK tax. However, the same profit may also be subject to tax in the country in which the person is tax-resident, and this can lead to double tax charges unless the individual is able to claim double tax relief in the overseas country.
Due to the complexities in determining tax-residency, anyone considering living overseas for more than a few months should seek advice not just in the UK but in the overseas country as well, to establish their tax obligations in both jurisdictions. Regardless of tax-residency status, ‘accidental landlords’ who find themselves letting out their UK home whilst living away will need to register for UK tax self-assessment and will need to declare their rental income in a UK tax return where it will be subject to UK income tax.
