Pre Brexit and Taxes
This article considers what Irish owners of UK property should be considering in light of Brexit. Firstly however, if you are currently (pre Brexit) an Irish resident owner of a UK property it is imperative that you are correctly declaring this income in an Irish and UK tax return. This article here goes into detail on this.
Implications for Irish owners of UK property
Many Irish investors hold property in the UK. In my experience this came about for two reasons. Firstly, they lived or trained in the UK early in their career. They acquired a property, which they subsequently decided to rent on their return to Ireland. Otherwise, it is the typical Irish investor that was attracted to the UK market because of better rental yields and the opportunity to diversify their investment portfolio.
Brexit uncertainty has weakened sterling which will have a significant impact on Irish investors. Some areas in the UK have already witnessed a fall in property value. For investors wishing to enter the UK market there may be value on the horizon. However interest rate risk and currency risks need to be considered carefully. An Irish investor borrowing in the UK may be somewhat hedged as the loan on the property will also be in sterling. Also, low interest rates in the UK would be another bonus.
The Tax Implications
Deal or no deal however “Brexit” or “Remain”, a double taxation agreement going back to the 1940s long before either country joined the EU is in place. This means, that regardless of the outcome of any “deal” or even a “no-deal” situation this treaty will still govern the treatment of Irish tax payers. This treaty covers both income tax (the tax on rental income) and capital gains tax ( the tax on the disposal of the property). As this treaty is in place there is no double taxation or duplication in taxes and this should continue post-Brexit. As it stands currently Irish residents receive credit in their Irish tax return for taxes paid in the UK.
It is important to remember that new rules were introduced in the UK in recent years. Now capital gains tax will be charged in the UK to non-resident property owners. Read more on this on HMRC’s website here Many UK investors contact me frequently as they are not aware of the 30 day deadline to report the disposal of the property to HMRC. Penalties are typically enforced by HMRC for those that miss this 30 day deadline, even if a taxpayer made a loss or no gain on the sale. Capital gains tax on the disposal of a UK property will arise for Irish tax residents in Ireland (at 33%), with a credit being allowed for any UK taxes suffered in the UK.
This recent UK tax change coupled with currency and interest rate risk could lead to some Irish investors exiting the UK property market. Some investors are also looking on this as a good time to gift the property to the next generation as it could mean a lower capital acquisition tax liability for the person inheriting the property.
With many things to consider it could be worthwhile discussing your options. We specialise in supporting non resident landlords. To make an appointment to discuss your personal situation please email firstname.lastname@example.org