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Tax on property and rental income Tax on overseas property

a spanish villa

You'll also need to pay taxes on properties abroad

If you live and pay tax in the UK you must tell HMRC about any rental income you receive from your overseas properties. 

How will I be taxed?

You are taxed on your foreign properties in the same way as you would be on any UK properties. 

In short, you work out the profits for all your foreign properties as a whole (rather than as separate properties) by taking any expenses away from any income.  

You can also apply any allowances such as capital allowances and the annual investment allowance that you are eligible for. You pay income tax on any profits at your normal rate. For more information see How rental income is taxed. 

When working out the UK tax, you normally use the exchange rate when the rent was due.

The remittance basis

If you are domiciled outside the UK or are not ordinarily resident in the UK, you can claim for your foreign income to be charged on the remittance basis instead.  

This means that you are taxed only on the income received in the UK in the year.  

This is an extremely complex area and you should consider seeking professional advice about the options available to you.

Losses

Any losses from property abroad can be carried forward to set against profits from your overseas properties. You cannot set foreign property losses against UK property profits or vice versa.

Tax credit

Normally the foreign tax authorities will also charge tax on your letting profits. But you won’t pay twice – the overseas tax paid is usually deducted from the UK tax that is due. 

Your tax return

You declare income from foreign properties on the foreign property pages of the self-assessment form.

Buying abroad

Always get advice from a local tax expert when you buy abroad. You may be liable for foreign taxes such as purchase tax and income tax on rents. Many countries also have laws dictating who inherits the property if you die. 

You may remain liable for UK inheritance tax on the property.

DirectGov has more details of how to declare rental income.