QUESTION: I live in Lisburn but recently acquired a property in Donegal as an investment. I have been renting out the house when my family have not been using it as a holiday home, what taxes do I need to be aware of?
ANSWER: The rental income will be a source of Irish income, so will need to report on an Irish tax return.
The Irish tax year runs alongside the calendar year, with returns due for filing by the following October 31 if you are sending it by post, or extended to mid-November if you are filing it online. You will also be required to pay your income tax liability on those dates.
Living in Northern Ireland and owning a house in the Republic of Ireland will make you a non-resident landlord in Ireland, for tax purposes. This means that you will need to appoint a collection agent in Ireland to collect rents on your behalf. They will collect rents from your tenants and withhold 20% income tax on the gross rents they pay to you and remit this withheld tax to the Revenue Commissioners on your behalf. You will get a credit for any tax withheld when you file your Irish tax return.
As well as having to file an Irish tax return and pay tax on your Irish rental receipts, you will also have to pay a further tax, known as Local Property Tax (LPT). This tax is calculated based on the value of your Irish property on November 1 2021. For the purposes of the LPT, the property values are organised into bands. Local authorities can vary the basic LPT rate on residential properties in their area.
You will be able to reduce the Irish tax payable on your rental income by deducting genuine rental expenses, such as letting fees, landlords’ insurance, mortgage interest, etc. However, LPT is not a tax-deductible expense when calculating your taxable rental profits.
As a UK tax resident, you will also need to report your worldwide income to the UK tax authorities via a UK tax return. You will have to recalculate your Irish rental profits under the UK tax rules, while the rules are largely similar, tax relief for mortgage interest is restricted to basic rate of tax even if you are a higher rate tax payer.
And you will be able to claim double tax relief on your UK tax return for the tax suffered on your Irish tax return.
- KellyAnne Murtagh (kellyanne.murtagh@aabgroup.com) is senior tax manager at AAB Group Accountants Ltd (www.aabgroup.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
