Overseas and Non-Resident Landlords
If you decide to let your UK property whilst you are overseas, it will be necessary for you to keep records of the rental income and expenditure to demonstrate whether you have made a profit or a loss, therefore, it is recommended that annual letting accounts are prepared in line with the tax year.
Up to 5th April 2017, HMRC were prepared to accept letting accounts as being prepared on a "cash basis" (rents received and expenditure incurred during the tax year), provided the gross rents were less than £15000 per annum. Where the gross rents were £15000 or more, the statutory "earnings basis" (rents and expenditure relating to the tax year concerned, whether received/paid during that tax year) was to be used.
However, from 6th April 2017, the limit has increased tenfold. The "cash basis" is to be the default method to establish the profit/loss for the tax year, where the gross rents are less than £150000.
Any profit made is taxable, subject to the availability of claiming personal allowances, whereas losses can be carried forward and offset against rental profits made in future years, all the while the "rental business" is continuing.
Bank statements, letting agent statements, invoices, receipts and annual mortgage interest certificates should be kept in support of the income and expenditure figures, in case HMRC request sight of them as evidence. With the HMRC's introduction of "Making Tax Digital", these records are also required to be kept digitally using approved bookkeeping software and filed with HMRC on a quarterly basis. This follows the abolition of the self assessment tax return and applies to all landlords where the gross rents from the "rental business" are £10000 or more per annum.
Quarterly reporting has been delayed for those where the gross rents are under the equivalent to the VAT threshold, ie currently £83000 (£85000 for 2017/18) and will not commence until the tax year starting 6th April 2019. Individuals whose gross rents exceed this limit will commence quarterly reporting a year earlier from 6th April 2018.