New landlord, issues to be aware of?

I am accidental US citizen, never lived in US. Married to non-US spouse. Up to date, simple situation, file separately, FEIE, treaty for workplace pension. No investments.

In the spring we will become accidental landlords as we are moving and cannot sell our current flat due to cladding issues. So we will rent it out. I understand for this I will need to complete a UK self-assessment (something I've never done) and take tax credits from the UK taxes on my US return.

I wondered if there are any other specific issues related to this, or if its better to speak to an advisor.

One particular question is how to handle the diffent calendar offsets. If we start renting in April it won't be until 2022 that I do my UK return, so when I file my 2021 US return how to I evidence any UK tax paid for the FTC?
Do I use the same deductions (letting agents fees, insurance etc.) for both systems - are there any gotcha's in terms of differences of whats allowed? (I know I only get 20% for mortgage interest in UK and nothing for capital repayment).

Another question is in this situation is it likely to be better to move my salary to FTC also? (I am a higher rate tax payer, so I thought my rental income will be taxed at higher rate and the FTC from that alone would be more than enough to offset any US liability, so was thinking to keep FEIE for my salary for simplicity).

Everything is joint owned, so I should apply all our deductions to the rental income then split any remainder 50:50 and only declare my 50%? What sort of record keeping would be recommended for this? (ie just keep a spreadsheet of my own along side the receipts, or is there any software anyone would recommend).

Is this something that is relatively acheivable for a normal amateur (I found the regular tax return and streamlined procedure quite OK once I read up on it based on my simple situation) or would it be advisable to get professional assistance.

Thanks for any pointers, best wishes to all.

Rent is reported in the US on Schedule C plus a Foreign Branch Form 1116 and Form 8858. Once mortgage interest and depreciation are claimed it is unusual to have a taxable profit for US tax purposes.  Nothing to prevent you paying an estimate of UK tax for 2021-22 to HMRC by 31 December 2021 so that you have some possible foreign tax credit to claim for 2021.

In the past I have managed schedule C for reporting rent on a house in England while living in the USA. It wasn’t too bad for someone who is used to doing his own taxes.

Similarly I would think an HMRC self assessment is not too bad, if needed.

I would check first if your rent/profit is high enough to warrant a SA. Try Googling or calling HMRC with your figures as I seem to recall a certain allowance or threshold that is allowed for renting out a house.

https://www.gov.uk/renting-out-a-property/paying-tax

https://www.gov.uk/renting-out-a-property/paying-tax

Thanks for that, I was heading out and didn’t have time to look for it. I know that my sister has been renting out a house for a few years now and had contacted HMRC who had told her that she didn’t need to do Self Assessment tax returns.

Thanks very much all for the input. I'm pretty sure I will have to file a SA: for others, the links says if income from property is over £1000 after expenses, or more than £10,000 before expenses you need to file.

Nothing to prevent you paying an estimate of UK tax for 2021-22 to HMRC by 31 December 2021 so that you have some possible foreign tax credit to claim for 2021.

How would I go about doing this on the HMRC side? I have seen "payments on account" but that seems to be fixed by HMRC based on the previous year. This would be the first year of self assessment so no previous amounts to go on (but obviously know how much rent we're taking so easy to calculate.

How would I go about doing this on the HMRC side? I have seen "payments on account" but that seems to be fixed by HMRC based on the previous year. This would be the first year of self assessment so no previous amounts to go on (but obviously know how much rent we're taking so easy to calculate.

I created an account online with HMRC and registered for self assessment a few years back. This is where I go to pay estimated taxes.

How would I go about doing this on the HMRC side? I have seen "payments on account" but that seems to be fixed by HMRC based on the previous year. This would be the first year of self assessment so no previous amounts to go on (but obviously know how much rent we're taking so easy to calculate.

If you open an online account as durhamlad suggests, you can pay however much you want to through that, even if you don't owe anything yet.

These days I have HMRC set up as a payee in my bank account, using my UTR in the memo field, and simply pay using my phone app. Making payments online I used to use my debit card but paying by bank transfer is easier for me as I don’t have to type in the card details each time.

These days I have HMRC set up as a payee in my bank account, using my UTR in the memo field, and simply pay using my phone app. Making payments online I used to use my debit card but paying by bank transfer is easier for me as I don’t have to type in the card details each time.

Yeah, there are a lot of ways to do it... they make it very easy for us to give them money!   

If you open an online account as durhamlad suggests, you can pay however much you want to through that, even if you don't owe anything yet.

Thanks very much - this was the information I was missing. So if I do FTC on "paid" basis, I can pay sort of voluntarily at any time and then use that paid tax as FTC?

Thanks very much - this was the information I was missing. So if I do FTC on "paid" basis, I can pay sort of voluntarily at any time and then use that paid tax as FTC?

Exactly. I keep a track of payments in a spread sheet but before end of year I log onto my HMRC account and do a print to pdf of the year’s payments to keep in case I am ever audited.

Next related question: how to handle valuation at the time we started renting out the flat? We bought it about 6 years ago and lived in it since then. We started renting it out at the start of June. I know for the US tax the depreciation is very important which I guess would be based on the value when it switched from our primary residence to a rental, but this is difficult to determine. Should we get a valuation from a surveyor? Can we do it based on Zoopla or similar informal guesses? It's complicated by the fact the flat has flammable cladding and so can't formally be valued (or sold) at the moment (due to RICS guidelines). I'm not even sure if it would be more in my favour to chose a higher or lower valuation (as the depreciation regime is so strange to me).