Posted by Nick Day on 11 Aug 2014

UK Property Income Taxation

According to recent press reports, HM Revenue & Customs (HMRC) is once again ramping up its campaign against UK property landlords that it perceives are evading tax on rent from UK Property Income.

HMRC plans to send 40,000 letters to UK buy-to-let owners that it believes may owe tax.  The letters warn of potentially large fines or criminal prosecution for failure to bring affairs up to date.

HMRC is apparently enlarging the team it uses to target this area with the aim of collecting further annual taxes of £500M.

UK tax residents and non-residents are liable to tax on the profit they make from the UK sourced property income.

UK Property Income

We often come across individuals who believe that UK income tax is not due on UK property income if they are tax resident in another country and reporting the income there.  This is incorrect as under UK domestic law and international tax treaty law, the UK will have the first right to tax income from the UK situated real estate, even if it is also subject to tax in another country.

Tax Planning

From a tax planning point of view, it is important to remember that the income from UK property owned jointly by two different parties such as a married couple will need to be reported to HMRC on a 50/50 basis.  However, it is possible to alter the beneficial ownership to other than 50% each.  If this is done properly from a legal perspective, and HMRC are notified within certain time limits, the UK property income can be split on say a 90:10 or a 95:5 basis when completing UK tax returns.  This may make sense, for example where one spouse has unused Personal Allowances and/or pays lower rates of income tax than the other spouse.

Capital Gains Tax

The capital gains tax position on the possible eventual sale of the property also needs to be taken into account when considering this issue.

Whether you need to disclose unreported income for previous years or are interested in planning to minimise the taxes you pay, we are available to help you.

Contact Tax Innovations

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or


See also…

Property Partnership Incorporation and SDLT

How to Own Property

Income Tax Payable on UK Property Income

HMRC Task Force Targets South West Property Owners

Non-UK Residents and UK Property Tax

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