Foreign rental income and double taxation are two of the most important considerations for UK expats earning income from overseas properties.
Navigating tax obligations across borders requires a detailed understanding of international tax laws, including how foreign rental income is taxed in the UK and how to avoid being taxed twice on the same earnings.
This guide explains who is liable for foreign rental income tax, what reliefs are available under double taxation agreements (DTAs), and how the UK tax treatment compares with other jurisdictions like Australia.
What You Will Learn
- Do you have to pay foreign rental income tax as an expat in the UK?
- What are the taxation laws for rental income in the UK?
- How do you avoid double taxation of rental income?
- Are there countries with favourable rental income tax rates?
- What is the difference in rental income taxation in the UK vs Australia?
- How to calculate rental income?
Who Is Liable for Foreign Rental Income Tax in the UK?
Foreign rental income refers to the earnings you make from renting property outside your country of residence.
If you’re a UK tax resident based on the Statutory Residency Test (SRT), you must pay income tax on your worldwide income, including foreign rental income.
You may also be subject to taxation on rental income in your country of residence unless a double tax treaty applies to exempt or reduce such liability.
UK non-residents are only subject to income tax on their UK-sourced income and gains. If you own and rent out property overseas but aren’t considered a UK resident for tax purposes according to SRT—you are not liable for UK tax on foreign rental income.
However, you may be liable for rental income tax in your country of residence.
How Is Rental Income Taxed in the UK?
Rental income is generally taxed as regular income in the UK, meaning you’re subject to tax based on your marginal income rate. If you’re a UK tax resident, this treatment also applies to rental income earned from overseas properties.
Any rental income you earn, sourced in the UK or abroad, is added to your taxable income and taxed at a progressive income tax rate.
The UK offers its residents a £12,570 Personal Allowance. If your total taxable income—including rental income—does not exceed this threshold, no income tax is payable.
Otherwise, you’ll be liable for income tax at the following rates in 2025/26:
| Taxable Income | Income Tax Rate |
|---|---|
| £12,571–£50,270 | 20% |
| £50,271–£125,139 | 40% |
| £125,140 and above | 45% |
Your Personal Allowance decreases by £1 for every £2 your adjusted net income exceeds £100,000, meaning you won’t receive a personal allowance if your income is £125,140 or more.
The amount of tax payable on UK rental income depends on the property’s ownership structure. Sole owners are fully liable for income tax on the entire rental income. In cases of joint ownership, each owner is only liable for income tax on their respective share of the rental income. In the event of joint ownership with a spouse, both partners are presumed equally liable unless demonstrated otherwise.
If you own property through a limited company, the company—not you—pays Corporation Tax on property earnings. The applicable Corporation Tax rate is typically:
- 19% for profits up to £50,000
- 19%–25% for profits between £50,000 and £250,000
- 25% for profits over £250,000
How Do You Report Foreign Rental Income?
Your reporting obligations for UK-based or foreign rental income depend on the amount you earn from renting out property. Consult the table below for details:
| Annual Rental Income Amount | Reporting Requirements |
|---|---|
| £1,000 | No reporting obligations because the first £1,000 of your rental is tax-free |
| £1,000–£2,500 | Contact His Majesty’s Revenue and Customs (HMRC) |
Over:
| Report the income on a Self-Assessment tax return |
The UK tax year runs from 6 April to 5 April the following year. If you start earning taxable rental income, notify HMRC and ensure you register for Self-Assessment by 5 October.
For instance, if you start receiving taxable rental income between 6 April 2024 and 5 April 2025, you are required to inform HMRC by 5 October 2025 and submit your online tax return no later than 31 January 2026.
Is There a Penalty for Filing a Late Income Tax Return?
If you register for Self‑Assessment after the 5 October deadline, HMRC may issue a ‘failure to notify’ penalty and set a new filing deadline three months from the date they notify you.
If your tax return is filed late, the following penalties apply:
- A fixed penalty of £100, even if no tax is due.
- After three months: a daily penalty of £10, up to a maximum of £900.
- After six months: an additional £300 or 5% of the tax due, whichever is greater.
- After twelve months: a further £300 or 5% of the tax due, whichever is greater.
In total, penalties can reach £1,600 or more if significant tax is owed.
Late payment penalties are also charged if tax is unpaid after the deadline:
- 30 days late: 5% of the unpaid tax.
- 6 months late: another 5%.
- 12 months late: a further 5%.
In addition, daily interest accrues on unpaid tax, calculated at the Bank of England base rate plus 2.5%.
To avoid these penalties and interest charges, and to ensure you meet your tax obligations accurately and on time, consult a financial adviser who can guide you through Self‑Assessment and filing requirements.
How Can You Avoid Double Taxation on Rental Income?
You can avoid being taxed twice on rental income if the UK has a double taxation agreement (DTA) with the country where you’re also considered a tax resident. The UK has a DTA with numerous countries, including:
The agreement specifies which country holds the taxing rights over rental income and the extent of tax relief you are entitled to. You may be eligible to claim partial or full relief either at the time the income is taxed or by applying for a refund afterwards.
If no DTA applies, you can still claim a Foreign Tax Credit (FTC) for tax paid overseas. The relief is capped at the amount of UK tax payable on the same income. You must declare this income and relief on your UK Self-Assessment return.
To claim the tax credit, you must report your foreign rental income on your income tax return.
Can You Avoid Tax on Foreign Rental Income?
UK residents who are domiciled in the UK cannot avoid tax on rental income earned overseas. However, relief is available under the new Foreign Income and Gains (FIG) regime.
Until 5 April 2025, UK non-domiciled residents could elect the remittance basis, meaning foreign income (including rental profits) was only taxed in the UK if remitted. This regime was abolished effective 6 April 2025.
From 6 April 2025, the FIG regime allows qualifying new UK resident expatriates—those with at least 10 consecutive non-UK tax years—to claim 100% exemption on foreign income and gains (including rental income) for their first four years of UK residence. Claiming FIG also means forfeiting your UK Personal Allowance and CGT annual exempt amount.
Under the Temporary Repatriation Facility (TRF), you can remit pre-April 2025 foreign income and gains at a reduced rate—12% for income/gains paid in 2025–27, and 15% for 2027–28.
For individuals who do not qualify for FIG or choose not to claim it, foreign rental income remains taxable in the UK, although you can claim a Foreign Tax Credit (FTC) for overseas tax paid.
To accurately determine your domicile status and assess your eligibility for available exemptions and reliefs, it is advisable to consult a cross-border tax specialist at Titan Wealth International.
Which Countries Offer Favourable Tax Rates for Rental Income?
Purchasing and renting out property in countries with favourable rental income tax regimes can help maximise your earnings.
While you’ll still have to pay some tax after claiming reliefs and deductions, low tax rates allow you to retain more of the rental income profit.
Countries with the most favourable tax rates for rental income that have a DTA with the UK include the following:
| Country | Tax Rates per Monthly Income | ||
|---|---|---|---|
| Up to £1,200 | Up to £4,700 | Up to £9,500 | |
| Cyprus | 0% | 20.95% | 27.98% |
| Luxembourg | 2.94% | 24.66% | 33.44% |
| Georgia | 5.00% | 5.00% | 5.00% |
| Switzerland | 5.57% | 11.41% | 19.24% |
| Austria | 5.76% | 29.36% | 39.30% |
Besides these, countries like the UAE, the Cayman Islands, and the Bahamas are considered tax havens because they impose no income tax on rental property.
If you earn a rental income from properties in one of these countries, you’ll only be subject to UK tax.
How Is Foreign Rental Income Taxed in Australia vs the UK?
If you’re a UK expat who owns property in Australia or an Australian expat with rental property in the UK, you could avoid double taxation on rental income since the UK has a double tax treaty with Australia.
You can claim the relief using a Foreign Tax Credit in the UK or Australia’s equivalent mechanism, the Foreign Income Tax Offset (FITO).
Both the UK and Australia have similar tax rules regarding rental income:
- Residents must report worldwide income on a tax return, including foreign rental income.
- Deductions such as property management fees and repair costs are allowed when calculating taxable income.
However, these countries differ in the following aspects:
| Factor | Australia | The United Kingdom |
|---|---|---|
| Tax rate | Progressive rates up to 45%, applicable to income exceeding A$180,000 (approximately £89,000) per year | Progressive rates up to 45%, applicable to income above £125,140 per year |
| Mortgage deduction | Interest paid on mortgages for rental properties is fully deductible against rental income. | Mortgage interest is not deductible, but a 20% tax credit is available on interest costs. |
| Tax-free allowance | There is a tax-free income threshold of A$18,200 (approximately £9,000) per year. | A Personal Allowance of £12,570 applies, with (rental) income up to this amount exempt from taxation. |
Note: From April 2025, the Foreign Income and Gains (FIG) regime replaced the remittance basis for new UK tax residents. This change significantly impacts how foreign rental income is taxed for non-domiciled individuals, particularly during the first four years of UK residency. To ensure compliance and optimise available reliefs, it is advisable to speak to a cross-border tax specialist at Titan Wealth International.
How Do You Calculate Taxable Rental Income?
When calculating your rental income, follow these steps:
- Aggregate all income received from the rental property.
- Subtract the applicable allowances, such as property allowance.
- Deduct allowable expenses, including maintenance, repairs, accountants’ fees, and utility bills.
The amount you get after deducting all allowances and allowable expenses is your taxable rental income. Be sure to account for exchange rate fluctuations, as they may affect the final figure.
To ensure you calculate your rental income tax accurately, consider contacting a financial adviser.
Book Your Free Tax Planning Consultation
Managing foreign rental income and navigating double taxation rules as a UK expat can be complex – but expert advice can make all the difference. In a complimentary call with Titan Wealth International, you will:
- Clarify your residency and domicile status and its impact on your tax obligations.
- Learn how to leverage double tax treaties and Foreign Tax Credits.
- Receive a tailored tax planning strategy to protect rental income and stay compliant.
Key Takeaway
Foreign rental income and double taxation are critical considerations for UK expats managing overseas property.
This guide has clarified your UK tax obligations, including when rental income is taxed, how reporting thresholds apply, and the consequences of late filing.
We also examined how double taxation agreements and Foreign Tax Credits can be used to reduce your overall tax burden and compared treatment in other jurisdictions such as Australia.
To safeguard your wealth and ensure compliance across borders, it is essential to implement a robust tax planning strategy.
At Titan Wealth International, our advisers specialise in international tax matters and can help you assess your residency and domicile position, structure rental income efficiently, and claim all available exemptions and reliefs.
