After lacking direction through Monday’s session, the pound may experience more significant movement today on the latest UK jobs data.
This could be missing a trick as this property could be a great potential source of additional income if you are willing to let it out to holidaymakers for the rest of the year.
There are several risks to consider when letting your property- but armed with information and a whole load of business-savvy, you stand a decent chance of making it pay.
The Nitty-Gritty:Once you’ve decided to go ahead, it’s really important to research legalities: you may not even be allowed to let the property without permission. Non-Bahamians with property in the Bahamas need a permit for rentals, while anyone hoping to let their house in the Balearics will need an ETV holiday rental license.
Taxation is also a significant and complex part of the legal process. Most guidance on renting out an overseas property recommends acquiring the services of an expert advisor.
TaxAs a UK resident, you generally pay tax on foreign properties in the same way you would for UK properties, using the same exchange rate as is applied to any rental payments.
You will still need to complete a tax return form in the country where the property is located: if that country has a tax treaty with the UK, British authorities will take what you have already paid into consideration to avoid double taxation.
Costs accrued via letting agent’s fees, legal fees and insurance will be tax deductible, so keep all receipts.
An alternative arrangement involves using the remittance basis. If you're domiciled outside the UK, you can apply to be taxed only on UK income. Doing this forfeits UK relief from tax paid abroad, as well as personal tax allowances and the Annual Exempt Amount for Capital Gains Tax.
You may need to make a claim to use the remittance basis, and/or pay a charge; if you’re not using the remittance basis, you must notify HMRC of unremittable income in the Foreign Pages of your UK tax return.
InsuranceInsurance is highly recommended: in many countries you can’t rent out a property without it.
If you already have household insurance, check whether the insurer can cover the property as a rental. Preferably, opt for legal liability insurance, which will cover you if anyone injures themselves in the property and decides to sue.
There may be certain stipulations outlined by your insurers, such as turning off water supplies if the property is going to be vacant. You may also have to buy flame-resistant furnishings. Make sure to read the small print and check you’re able to comply with each condition before signing off: you might need to hire somebody to carry out some of the requirements for you.
Additional OutgoingsTo achieve higher rates, it’s worth investing a little more on advertising, security and cleaning: these can be taken care of by a holiday rentals agency, if you’re not going to be around yourself.
Self-management or Agency?Generally, agencies charge anything from 20% of profits– prices can be higher depending upon the services you require.
If you decide to employ an agency, check their reputation beforehand: also be conscious of any potential language barriers as you don’t want to lose important information in translation.
If you’re thinking of managing the property yourself, consider everything this entails. You will need to clean the house between guests, run regular risk assessments and be on-hand should anything need repairing. The cost of fuel alone in driving back-and-forth may make agency management preferable.
Advertising, too, can be a hassle. Creating your own website can have cost benefits but how will people find it?
Reputable holiday rental websites can be a great way to get exposure and will give you an idea of appropriate pricing.
When it comes to repatriating your rental earnings, you will want to consider your currency options to see what the most cost-effective way of transferring your money.
Currencies Direct not only offer more competitive exchange rates than most high-street banks but we also offer a range of additional services which can help you to maximise your returns.
SummaryFrom checking your furnishings are compliant to locking away valuables and safety hazards – there’s a lot of work involved in renting your foreign property. Once you’re up and online though, you can look forwards to a bit of extra income.
Remember too, there are plenty of forums and sources of support from people who’ve made the same decision. Don’t be shy to reach out and ask for help – after all, the move to rent should benefit you first and foremost.
Currencies Direct is one of Europe's leading non-bank providers of currency exchange and international payment services. Since we were formed in 1996, we've maintained our focus on providing innovative foreign exchange and international currency transfer services to corporations of all sizes, online sellers and private individuals. We have also expanded our services to provide dynamic and pioneering "business to business" solutions to help companies, tier 2/3 banks and other non-bank financial institutions to process their international payments. Our headquarters are in the City of London (United Kingdom) and we have operations in continental Europe, Africa, Asia, and the United States. Currencies Direct is jointly owned by private equity firms Palamon Capital Partners and Corsair Capital.