French taxes on UK rental income

[Benjamin]

We are French tax resident with only one propertyhere in France. We are considering buying a UK property to rent out. In order to do this we will need to use capital which is  presently sitting in a UK bank account and as a consequence we will loose gross interest which we are currently receiving and this will be replaced with the rental income.

We obviously know how our gross interest is dealt with under the French tax system and the additional 11% we pay in social charges but can someone tell us if rental income also attracts social charges? Or is the rental income initially declared and taxed in the UK and also included on our French tax return?

When we rented out a UK property in the 90's we were allowed to offset (if I remember correctly) the agents' fees, any repairs which we paid for, buildings insurance and 10% of the gross rental for wear and tear and we just declared the net figure for tax. Are there any of these type of allowances available in France against UK rental income if so what they are?

Edit: we will be taking professional advice if we decide to proceed.

[Maricopa]

Even though you are a French tax resident, any income earned on rental in the UK is subject to UK taxation.  It is delared on your French tax return as well, though no further tax is due.  It is simply used to calculate yur Revenue Fiscal Reference.

All the usual deductions in the UK are still available, and will also be entered (as a total) on the French tax return.

Hope this helps.

[Benjamin]

Thank you for that. First stop HMRC then.

[dr orloff]

There are a few threads on this and other forums dealing with this subject - showing you exactly how to declare the income on your French tax return.

Just to add to the above comment - there are no social charges in France on your UK rental income.

 

 

[Sunday Driver]

It's all there in the French Tax FAQ.....[;-)]

 

Rental Income from UK Property

 Q          I have a house in the UK that I rent out.  Tax is deducted from the rent in the UK, do I need to fill out a French tax return.

A          UK property rental income is covered by the UK/France Dual Taxation Treaty in the same way as public sector pensions mentioned above, so whilst it is taxed in the UK, it still needs to be declared in France because it's taken into account for determining your overall French tax rate.

So, on form 2047, your gross rental income goes in section VII. REVENUS EXONÉRÉS PRIS EN COMPTE POUR LE CALCUL DU TAUX EFFECTIF - the form explains which figures go where.  You then transfer the total to box TI on your form 2042.

Note that income taxed in the UK under the Dual Taxation Treaty is not subject to French social charges.

 

[Benjamin]

[quote user="Sunday Driver"]

It's all there in the French Tax FAQ.....[;-)]

 

 

[/quote]

Drat!!!!!!!! Thank you Sunday Driver, I just haven't got used to having that sticky available yet.  [:D]

Could you just expand on the last part of the answer where it refers to determining your overall French tax rate?

[BJSLIV]

determining your overall French tax rate?

It the old marginal rate of tax business.

Even though you don't have to pay tax in France on the UK income its included with all your other income when working out the rate of tax you pay in France. So some other income that on which you might currently pay tax at say 15% could be pushed up to the next band of say 20% once your UK income is included in the calculation.

[Benjamin]

Thank you for that clarification. So strictly speaking so long as you pay French income tax UK rental income is not entirely tax free here.[Www]

However [:D] in our case we will be substituting one source of income (UK gross building society) for another (UK rental) so effectively we won't be paying any additional tax here but we save on the social charges (tax) we have been paying.

Just to add a further point which has been implied in other answers but not actually stated which I checked with HMRC Centre for Non Residents this morning, even if your are no longer UK resident but you have this type of income you are still entitled to UK personal tax allowances. In our case as our thoughts are to purchase a modest property in our joint names so long as our net rental income is below the total of our combined personal allowances we will not pay any UK tax on it.

Thanks for everyone's input.

Now does anyone know when the UK housing market will bottom?  [blink]