Buying property UK, owning stocks & Tax

[Macster]

Hi

Right now I'm invested in Irish domeciled ETFs listed on the LSE like IWDA / EIMI etc... Currently bouncing all over the place.

I've been considering investing in a small flat in Scotland near my folks and letting it out as part of my investment/retirement portfolio. The annual income expected would be low...around £10k per annum but these properties are very cheap to purchase so ROI is decent and I'd still be within my non-resident tax allowance of £12k. (Is this correct?)

Main question is - I vaguely remember reading something last year that said if u hold stocks in UK that you would get taxed on property? I'm not sure where or what I read, I can't find it but wondered if there is something I should be aware of if I decide to purchase?

None of my investments pay out dividends so I'm not accumulating any income in the UK at the moment.

TIA

[greenmark]

If you hold stocks with a UK broker, then the dividends are taxable in the UK.

For a non-resident you have the option of declaring dividends as "disregarded income" which are zero tax.

But if you declare disregarded income, then personal allowance won't be given to your other UK income.

That means:
- If you have rental income and you have no other UK dividends income, then your £10k gross rental income would be within your personal allowance.
- If you have dividend income and no property, then all your dividend income can be declared as disregarded income and is zero rated, even if it is more than £12k.
- If you have both dividiend income and property, non-residents can declare the dividends as disregarded income but personal allowances won't be given against other UK income. So your £10 rental income would be fully taxable.
- If you have both property and dividend income, you can choose to pay taxes as if UK tax resident and not claim disregarded income. Your total taxable income is £10k rental income plus dividends income minus the personal tax allowance.

Dividends paid into accumulating ETFs held in the UK are still taxable. For those you need to calculate and declare the amount of dividends that went straight into the accumulating funds. For this you need to get reference docs from the ETF providers.

Dividends paid into a tax free account (eg ISA or SIPP) are not included as part of your dividend income.

If you hold UK listed stocks with a broker outside the UK (eg with IBKR) and you are not UK tax resident, then the dividends are not liable to UK tax. So in that case you only need to declare your UK rental income.

UK rental property and REITS are liable to capital gains tax when you sell up, even if you are non-resident. UK stocks are not liable to CGT if you are non-resident.

I am not a tax lawyer and the info I have gained has come from multiple online articles. So if you really want to go down this route I recommend you read further on notes below.

https://www.gov.uk/government/public...nt-income-2019

[Macster]

Thanks, this is similar to what I'd read. For a newbie like me it's a lot to digest & retain! Really helpful to list it out.

This is my case :
If you hold UK listed stocks with a broker outside the UK (eg with IBKR) and you are not UK tax resident, then the dividends are not liable to UK tax. So in that case you only need to declare your UK rental income.

So I guess I will have the tax allowance up to £12K on the property rental and then I pay tax on capital gains on it if any increase in value if I sell it? Correct?

[greenmark]

Thanks, this is similar to what I'd read. For a newbie like me it's a lot to digest & retain! Really helpful to list it out.

This is my case :
If you hold UK listed stocks with a broker outside the UK (eg with IBKR) and you are not UK tax resident, then the dividends are not liable to UK tax. So in that case you only need to declare your UK rental income.

So I guess I will have the tax allowance up to £12K on the property rental and then I pay tax on capital gains on it if any increase in value if I sell it? Correct?

Correct.