British rental property income taxation rules

[PandaMunich 16,869]

Thank you for the update! :)

[Langenau lad 0]

Possible change to British rental taxation

 

Hi

 

We have a house in the UK which we rent out, claiming our personal allowance on the income.

 

It seems that this is in the British government's tax targets. It is being discussed that personal allowances for non residents may be abolished?

 

To be honest this was always in the "too good to be true" category so I can understand why it is going but it if it happens it will impact a lot of expats.

 

LL

[Ciej 43]

Hello LL - I have good news for you. The British govt has already decided that the personal allowance will not be touched for expats for another few years.

 

http://www.telegraph.co.uk/finance/personalfinance/expat-money/11272572/Expats-will-keep-their-tax-break.html

 

Too good to be true it may be. But it lives on.

 

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[Johnny English 3,071]

 

The British govt has already decided that the personal allowance will not be touched for expats for another few years.

Ummmm....there is a UK election 7th May 2015.

[Johnmortlock 0]

hi there,

I'm trying to find out whether my UK property rental income is also taxable in Germany, an d if so what the double taxation rules are. If the answer is 'find a tax adviser' it would be great to get a recommendation for someone Berlin based, ideally English speaking.

 

Thanks in advance!

 

[adminmerge][/adminmerge]

[murphaph 9,845]

Currently not taxable in Germany and does not affect the rate at which your taxable income is taxed.

[Biglaa 147]

I'm glad to see this thread now, I was getting a bit worried. I submitted my tax return last year, and had a message back from my steaurberater saying that the Finanzamt don't believe my declaration as it doesn't include my UK rental income. I told him that it shouldn't matter as it is declared in my UK assessment, and have heard nothing back since!

[Teterow 22]

Hi there,

 

I am currently sh**** myself as two UK tax returns are overdue and the penalty is massive.

Is it stil correct that if you own and rent out a property in the UK and you make a loss, that you should not have any tax payments to do? I have completed the online HMRC SA form as best as I could but find it to be a complete jungle. I am now scared to send it off, as I have probably not answered all sections correctly.

It is probably best if I ring them up in the morning, but if anyone can put my mind at ease this evening I would appreciate it.

 

[Biglaa 147]

Give them a call, to be fair on the couple of occasions I had to speak to them they were actually pretty helpful. (Unlike the council tax people, but that's a whole different argument!) Judging by my tax returns (I made a loss too last year) no tax will be due, but the problem will be that you still had to declare it. Regarding the actual filing, I was a bit daunted by the whole thing at first, but then I tried taxcalc.com and that was really straight forward, and files automatically with HMRC. (And no, I don't work for Taxcalc!) The majority of the "approved" sofware list the HMRC site lists are only for UK resident users, so mostly useless for expats.

[Gambatte 972]

Currently not taxable in Germany and does not affect the rate at which your taxable income is taxed.

You don't pay more income tax in Germany because of rental income abroad.

However, your health insurance cost (if you are "public") is calculated based on your global income.

 

Yes, even if you made a loss in your UK rental income you still have to file it to HMRC (but you won't pay tax).

 

[murphaph 9,845]

You don't pay more income tax in Germany because of rental income abroad.

However, your health insurance cost (if you are "public") is calculated based on your global income

 

 

Think it depends on your employment status actually. Self employed would indeed be liable for health insurance contributions from their rental income but most employees are currently exempt.

[Teterow 22]

Ok thanks - I will ring them this afternoon and explain.

 

[Gambatte 972]

Ok thanks - I will ring them this afternoon and explain.

 

The (very few) times I called them they were always very kind and helpful.

Good luck.

[Tim Hortons Man 543]

On 23/03/2015, 13:00:20, Ciej said:

Hello LL - I have good news for you. The British govt has already decided that the personal allowance will not be touched for expats for another few years.

 

http://www.telegraph.co.uk/finance/personalfinance/expat-money/11272572/Expats-will-keep-their-tax-break.html

 

Too good to be true it may be. But it lives on.

 

(If you approve this message, please click on the green "plus" icon below right)

The government giveth and the government taketh away. Landlords can no longer deduct mortgage interest as an expense, unless it is held in a limited company. 

[Nekosama 1]

Hi, I came across this topic thanks to Google.

That thread was a goldmine to me, thanks a lot to everyone who contributed.

 

In short, I also rent out a place in the EU country (France, if it's important). Can anyone please confirm that what was said in this thread a while ago, ie no need to even declare the rental income to the Finanzamt since there is a GER-FRA tax agreement and France is obviously a EU country, is still valid?

I pay already a lot of tax in France as non-resident for this small property, so I'd relieved to know that it won't impact negatively my German tax!

Thanks a lot

 

[GaryC 394]

I have just read this thread and Section 32b (Progressionsvorbehalt) with interest as I own a rental property in the UK (UK resident but in receipt of German state pension, so also taxable in Germany) and need to understand the Progressionsvorbehalt in relation to electing or not for unbeschrängte Steurerphflicht. 

 

You should check that the Germany-France double tax treaty gives taxing rights over property rental income to France.  Based on what is written in this thread that seems likely but you will need to check.  If it does then the income will be exempted from German tax (assuming the treaty also operates the "exemption method" and not a tax credit method - probably in Article 23 paragraph 1 unless the treaty numbering is odd) and as France is an EU country it is excluded from the tax rate calculation as set out in 32b.

 

Although the Germans have no interest in the foreign rental income (just as the Brits have no interest in the German state pension), I do wonder whether mentioning it in a side letter and quoting the treaty article and EStG as PandaMunich suggested in this thread is a way to pre-empt enquiries. I am certainly considering doing that when submitting my UK Self-Assessment Return for at least the first year covering the German State pension...

[PandaMunich 16,869]

1 hour ago, Nekosama said:

In short, I also rent out a place in the EU country (France, if it's important). Can anyone please confirm that what was said in this thread a while ago, ie no need to even declare the rental income to the Finanzamt since there is a GER-FRA tax agreement and France is obviously a EU country, is still valid?

I pay already a lot of tax in France as non-resident for this small property, so I'd relieved to know that it won't impact negatively my German tax!

 

Yes, it's valid because the double taxation agreement (DTA) between Germany and France has a "progression" clause (= Freistellungsklausel = exemption clause) for income from immovable property (which is described in article 3 of the DTA) in article 20 (1) a: https://datenbank.nwb.de/Dokument/Anzeigen/94974_20/

 

And Germany then waives their right to exercise the progression that that DTA article gives them in its national income tax law, in the "progression" section §32b EStG, since it's rental income from an EU state.

 

*************************************************

 

As @GaryC said, other double taxation agreements, e.g. like the one between Germany and Spain which has it in article 22 (2) b) vii), have a "tax credit clause" (= Anrechnungsklausel) instead, and therefore Spanish rental income does have to be declared in your German income tax return.

[Nekosama 1]

Thanks, I am glad to read it's still valid.

I have considered selling the place to avoid complications but I might keep it then.

[scook17 292]

Hmm, I wonder what happens post brexit regarding UK property rental. As of the end of 2020, the UK is EU no more.... 

 

[GaryC 394]

The tax position as such will not change as that relies of the double tax treaty between Germany and the UK, which has nothing to do with Brexit but the Progressionsvorbehalt exclusion will probably cease to apply unless the UK remains in the EEA and who knows where that will end up given that the talks are essentially on hold now because of the other mildly important issue... 

 

While the latter would be annoying, it would not be the end of the world as it would only increase your German tax rate by a couple of percentage points as I understand it.