Having an overseas property is just a way to improve your living standards by diversifying it. It depends on the visitor's taste or owner what he is looking for in an ideal house portrayed in his mind. Apart from the sense of calmness and enjoyment, overseas properties are wrapped with tax bills like capital gains tax, income tax, and rental tax that everyone needs to know before they even think about any other further move! In the following article, we will be having an inside depth about the proper knowledge for tax on overseas property and how to tackle them. 

"Overseas properties are wrapped with tax bills like capital gains tax, income tax, and rental tax." 

If you have a property outside the UK and you have rented it, you will have to pay rental tax in the same way as you would have to pay if your property was inside the UK. The tax applies to the profit gained, which comes out after deducting expenses from the total income gained. The rental income is taxed based on the tax band in which you lie. It may be 0%, 20%, 40% or 45%. Your rental income gets added to that income, letting you lie in a higher tax bracket if you have another source of income. You have to pay tax on rental income every year. Let's consider an example 

You earn £40,000 a year from your job and make £13,000 from rental income profit. By adding both of the amounts, your total income exceeds £50,270. It will let you fall in a higher tax bracket implementing a higher tax ratio on your profits gained from the overseas property. Now you will be taxed at a 40% rate. 

If you have a property outside the UK and a UK non-resident, you can acquire your overseas income to be charged on a remittance basis. On a remittance basis, you will be charged only on the income received in the UK in the following tax year. Your source of overseas income shall be a rental income or capital gains acquired by selling a property and gaining a profit from it. 

"If you have a property outside the UK and you are a UK non-resident, you can acquire your overseas income to be charged on a remittance basis." 

It is imperative to consider which items are included in liability. Capital gains tax is liable on the property and everything included in it, assets, shares, interests, and sure gifts. The profit gained by any of these items will be liable to capital gains tax that you have to consider while calculating your total amount. 

There are specific ways to gain tax relief in this regard. These tax reliefs should be declared. 

• If you replace thebusiness assets that allow you to defer the capital gains tax on business assets, you can have Rollover/ holdover relief.
• You can also have a business incorporation relief applicable when you transfer your business company in exchange forshares.
• You can also enjoy Holdover gift reliefs on some business gifts or gifts made into trusts. 
• Entrepreneurs Relief might also entertain you. It allows disposal of a material part or all of your business to have the capital gains tax rate reducedto 10%. It has a lifetime limit and is reduced from £10 million to £1 million from 6^th April 2020

A very important advice is that don't declare your overseas assets separately. The profit gained by all of these assets should be displayed as a whole. In case you have more than one property to rent or have more than one house you are thinking of selling, you should calculate capital gains tax or rental income as a whole and not in chunks.  

"The profit gained by all of the assets should be displayed as a whole." 

You might be taxed twice if you don't input your taxes information correctly because the foreign authorities will also be claiming tax on capital gains gained by selling the property. The UK authorities or HMRC will also be inquiring about the profit gained by selling the overseas property. So you might have to pay tax two times. The easy solution to this burning problem is to declare your assets in the Self-Assessment Return properly. They will ask about any tax you have submitted before solving this tax return, and you should honestly express that. Only then will you be saved from being taxed twice because whenever you sell an overseas property while being a part of the UK community, you are under the influence of the UK tax system and overseas tax system.  

Suppose you are considering buying overseas property. In that case, we suggest you first investigate the tax systems and the applicable taxes on your property because this will vary depending on the country. So, it advisable to get help from a tax consultant or advisor just like Legend Financial that will help you analyze a proper country before you invest in that country and get under cover of its tax system. 

Purchase tax and income tax might be looking for you in your new home in a new country. Even inheritance tax might join them because many countries look for who will inherit this property once the owner dies. So, the country system has long-term planning based on your purchase of a specific house. Therefore, don't forget to seek help from your local tax advisor near you. 

Purchasing property overseas is not a big issue if you have money and an expert with a technical mind to go through all the possible ways to reduce your tax liability. Invest as much as you can but with proper direction and strategy not to lose a more significant amount. You might also consider your UK property and its tax like capital levy, death duty tax before considering foreign property. 

But you may also improve your lifestyle by exploring the beauty of nature in different countries. You enjoy and let your tax consultant handle all the ups and downs while selling, renting, or purchasing your property overseas. Get in touch with Legend Financial and make your life easy by clicking here.