Holiday Rental - Declaring Income - Paying Tax..

[Viv01]

This is a pretty basic question and am sure someone has already answered it - but I can't seem to find the answer on the site and would really appreciate some clarity.

When and how do you pay tax on your rental income for a holiday let? We are UK residents. This is our first season letting - we have had guests since May.

I've heard and read different things on the internet so am now thoroughly confused. Some say you have to send a form in quarterly, others say at the end of each year.. Do we pay tax in the UK or Spain (or God forbid a bit of both!).

[Casscat]

Here's the bad news - it's both.

In Spain you submit your Modelo 210 every quarter. The Spanish tax year runs 1 Jan to 31 Dec. You will have very limited deductions available in comparison with the UK.

The fact that you have reported your Spanish income in Spain does not absolve you of the requirement to also report your 'foreign income' in the UK. Happily your property should qualify as a furnished holiday let so there are lots of exemptions - but do read up to ensure that you pass all the HMRC tests. You will receive a credit for the tax you have paid in Spain, but if you are a higher rate taxpayer in the UK you may have to pay extra unless you have allowable deductions to obviate this. Having started my rental last year I have around £30k of deductions allowable in the UK so I will not pay UK tax for a while yet. Unfortunately I don't have the same generous allowances in Spain so I am already paying tax there.

[Viv01]

Thanks for the swift reply - I don't suppose you could give me the contact for your Spanish accountant? We have been using a Malaga conveyancing law firm that helped us buy our property but they don't seem as hot on the ins and outs of paying tax if you own a holiday rental!

[kevsboredagain]

As Casscat says, it's every quarter and not that much is allowed as expenses for EU residents. You don't have many days to file it after the quarter either. Then you'd declare it also in the UK and you shouldn't pay tax twice as any tax paid in Spain will be offset against tax due in the UK. As more expenses would be allowed in the UK, you shouldn't end up paying more tax unless you're already in a very high tax bracket.

In addition to tax on the rental income, there's another tax, payable yearly on the deemed rental income, for the days you didn't actually rent it. Yep that's right. They tax you for the days it's empty too as you "could" be renting it.

[Casscat]

Thanks for the swift reply - I don't suppose you could give me the contact for your Spanish accountant? We have been using a Malaga conveyancing law firm that helped us buy our property but they don't seem as hot on the ins and outs of paying tax if you own a holiday rental!

I will ask my accountants if they are able to take on any more clients. On their web site they stated that in order to continue to deliver a high standard of care to their existing clients they were not taking on new business, but I managed to contact them via a back door route and they took me on so they may be able to help you too. I have found them very, very efficient so far.

[Viv01]

Thanks Casscat - that would be great.

[Casscat]

Absolutely gorgeous property you have by the way! And stunning photos, which is no surprise reading your owners' page. If you fancy a trip to Casarabonela to improve my photos you are very, very welcome!

[Viv01]

Thanks - it was a lot of work to renovate it - but yes it is just lovely there. I dream about it!! Trouble is - it's so nice it got booked up very quickly so now we can't actually go there till October! Your place looks rather lovely too..

[Casscat]

You have to get in quick and reserve your own space - that's what I have done for two weeks commencing on Sunday. Cannot wait to be back