We have just secured our first holiday rental on our holiday house in France. What steps are needed to make this legitimate with the tax office. We are domiciled in the UK. Are we entitled to a French tax free allowance or does this come under double tax relief in the UK? Thanks
Hi Liz - you will indeed need to declare the rental income in France and the UK. Due to the double taxation treaty between the two countries - essentially you’ll only be taxed once with France having priority. So, if the UK tax liability is higher, you’ll pay the difference to the UK but, if it’s lower you won’t get any refund of French tax paid!
As you’re not a French tax resident - you don’t get a French tax-free allowance and your net (i.e. less expenses) rental income will be taxed at a flat rate of 20%. Lower rates are available for those on low global income. You will also be liable to 15.5% social charges on the net income - a contentious issue for non-residents but it is still being heartily applied! Sadly the social charges element is not-deductible against UK taxes.
Your 2017 income will need to be declared in April / May 2018 using the appropriate forms at the time. The tax office nearest to your holiday rental will help you out.