Tax and rental income

[Carole]

I am returning to UK by the end of June and am probably going to rent my house in France for about a year as I cannot sell it at the moment. The prospective tenant actually may wish to purchase the property in the long term.

I pay no tax in France or UK (small income). I only receive my UK pension and a small occupational pension.

How does the tax work on rental income. Do I pay it in France or do I have to declare it and pay it in the UK.

I do not own a property in the UK and will probably be staying with my daughter.

[parsnips]

[quote user="Carole"]I am returning to UK by the end of June and am probably going to rent my house in France for about a year as I cannot sell it at the moment. The prospective tenant actually may wish to purchase the property in the long term.

I pay no tax in France or UK (small income). I only receive my UK pension and a small occupational pension.

How does the tax work on rental income. Do I pay it in France or do I have to declare it and pay it in the UK.

I do not own a property in the UK and will probably be staying with my daughter.[/quote]

Hi,

      You have to declare any rents in France as they are liable to tax here. There are different tax regimes depending on whether you let furnished (the most tax efficient) or unfurnished.

 As a non-resident the minimum tax payable is 25% of the TAXABLE rent--in a furnished let , this is only 29% of the gross rent-so tax = 25% of 29% of the rent . If you can produce evidence (ie. UK tax assessment) that the rents would be taxed at less than 25% in the UK, the french will reduce the rate charged here.

      However , letting the house means that you lose the special exemption from capital gains tax granted to non-resident sellers . If the house has been your principal residence for more that 2 years and you have vacant possession on Jan 1 preceding the year of sale no CGT is due. To qualify as your principal residence you have to have been making french tax declarations during your period in France. If youy expect to make a significant profit on selling the house you may wish to reconsider your plan to let it out.

      Unless you have a particular friend or relative in mind to rent to, you should also bear in mind the problems that can be caused by bad tenants who are heavily protected by french law, and can be very difficult to evict.