leaving uk to apply for an 804 visa. do most people rent out their homes or sell. looking for the best way to improve income and reduce tax implications

[yvonne denby]

moving to australia on aged parent visa with my husband. to live with our daughter. we will have my husbands  uk state pension, and very small army pension ,which would only total 260 pounds a week,and was thinking of selling the house and investing 250k to give an income ,maybe high interest savings account so we could access capitol if needed. but it would appear there would be 32% tax to pay on the income raised.? is this correct?  or would it be better to rent the house out which would generate income in the uk which i could put in my name as i dont pay tax till 2028, then sell the house and do the fore mentioned when i receive my state pension . all help appreciated. thank you. Also how much would it cost to get financial advice and help regarding the best way forward 

[paulhand]

4 hours ago, yvonne denby said:

moving to australia on aged parent visa with my husband. to live with our daughter. we will have my husbands  uk state pension, and very small army pension ,which would only total 260 pounds a week,and was thinking of selling the house and investing 250k to give an income ,maybe high interest savings account so we could access capitol if needed. but it would appear there would be 32% tax to pay on the income raised.? is this correct?  or would it be better to rent the house out which would generate income in the uk which i could put in my name as i dont pay tax till 2028, then sell the house and do the fore mentioned when i receive my state pension . all help appreciated. thank you. Also how much would it cost to get financial advice and help regarding the best way forward 

@Alan Collett is your go-to guy for questions like this. 

[Marisawright]

9 hours ago, yvonne denby said:

moving to australia on aged parent visa with my husband. to live with our daughter. we will have my husbands  uk state pension, and very small army pension ,which would only total 260 pounds a week,and was thinking of selling the house and investing 250k to give an income ,maybe high interest savings account so we could access capitol if needed. but it would appear there would be 32% tax to pay on the income raised.? is this correct?  or would it be better to rent the house out which would generate income in the uk which i could put in my name as i dont pay tax till 2028, then sell the house and do the fore mentioned when i receive my state pension . all help appreciated. thank you. Also how much would it cost to get financial advice and help regarding the best way forward 

I see on another thread that you're coming to apply for the 804, which means you'll be on a bridging visa for the rest of your lives.

You need a professional adviser who can work out what the most tax-effective option will be.  It's too risky to rely on advice from a forum. For instance, keeping the house sounds like a good idea, because interest rates on savings accounts aren't keeping pace with inflation.  However when you sell the house, you may be liable for capital gains tax and that could wipe out the benefits.  You could end up paying a lot of tax if you get it wrong! 

You need someone who understands both British and Australian tax, which can be hard to find.  As Paul says, Alan Collett from BDH Tax would be a good person to talk to.   Alan will be able to give you a quote for a consultation.  It won't be cheap but it could save you thousands in the long run.

I am concerned about your income level.  Australia is not a cheap place to live.  Are you aware that your UK state pensions will be frozen on the day you leave the UK, and you will never receive any of the increases you'd receive if you stayed in the UK?   That means your income will buy less and less every year as inflation rises.   Consider what a pound buys now compared to ten years ago -- what will your state pension buy in ten years?

This article is written for Australian pensioners but it talks about how much you need to live in Australia in retirement:

https://www.gesb.wa.gov.au/members/retirement/how-retirement-works/cost-of-living-in-retirement

You will be covered by Medicare (our equivalent of the NHS) but unlike the NHS, it's not completely free.  Australian pensioners get concessionary pricing, but as you're on the 804 visa, you won't be eligible for those benefits.  You'll pay the same prices as your daughter, i.e. around $30 for every prescription item, and $40 to $80 to visit your GP.  If you are on a few medications that can really mount up and eat into your income. 

I'm curious why you're not paying tax until 2028?

 

Edited September 5 by Marisawright

[yvonne denby]

6 hours ago, Marisawright said:

I see on another thread that you're coming to apply for the 804, which means you'll be on a bridging visa for the rest of your lives.

You need a professional adviser who can work out what the most tax-effective option will be.  It's too risky to rely on advice from a forum. For instance, keeping the house sounds like a good idea, because interest rates on savings accounts aren't keeping pace with inflation.  However when you sell the house, you may be liable for capital gains tax and that could wipe out the benefits.  You could end up paying a lot of tax if you get it wrong! 

You need someone who understands both British and Australian tax, which can be hard to find.  As Paul says, Alan Collett from BDH Tax would be a good person to talk to.   Alan will be able to give you a quote for a consultation.  It won't be cheap but it could save you thousands in the long run.

I am concerned about your income level.  Australia is not a cheap place to live.  Are you aware that your UK state pensions will be frozen on the day you leave the UK, and you will never receive any of the increases you'd receive if you stayed in the UK?   That means your income will buy less and less every year as inflation rises.   Consider what a pound buys now compared to ten years ago -- what will your state pension buy in ten years?

This article is written for Australian pensioners but it talks about how much you need to live in Australia in retirement:

https://www.gesb.wa.gov.au/members/retirement/how-retirement-works/cost-of-living-in-retirement

You will be covered by Medicare (our equivalent of the NHS) but unlike the NHS, it's not completely free.  Australian pensioners get concessionary pricing, but as you're on the 804 visa, you won't be eligible for those benefits.  You'll pay the same prices as your daughter, i.e. around $30 for every prescription item, and $40 to $80 to visit your GP.  If you are on a few medications that can really mount up and eat into your income. 

I'm curious why you're not paying tax until 2028?

 

 

[yvonne denby]

hi, thank you for your reply. my  daughter is a citizen in australia. i will be applying for an 804 visa. i will not receive my state pension untill 2028, hence no income at the moment. the rent will not exceed the uk tax threshold. this is why one option would be to rent the house out till then. then sell it and use the money to generate an income from 2028. but i understand there maybe capital gains tax to pay in australia in the gain made on the house from the date of arriving in australia to the date of sale?

[Marisawright]

1 hour ago, yvonne denby said:

hi, thank you for your reply. my  daughter is a citizen in australia. i will be applying for an 804 visa.

Yes, I understand that.  You will arrive in Australia on a tourist visa, then apply for the 804 visa.  You will receive a bridging visa when the tourist visa expires, and you will stay on that bridging visa for the rest of your life (because the waiting time for the 804 visa is about 30 years).

1 hour ago, yvonne denby said:

 the rent will not exceed the uk tax threshold. this is why one option would be to rent the house out till then. then sell it and use the money to generate an income from 2028. but i understand there maybe capital gains tax to pay in australia in the gain made on the house from the date of arriving in australia to the date of sale?

This is why you need expert advice.  It's residency, not citizenship, that decides most things tax-wise.  You won't be a resident of the UK any more, so I believe you'll pay UK tax on the rental income like a foreigner, which may mean different rates of tax -- but I'm not an expert, so you need to check that.  It's possible foreign investors don't even get a tax-free threshold, so that needs to be checked too.  Also, I'm not sure what Australian tax you're liable for on a bridging visa, so there's another question.  You probably wouldn't have to pay Australian capital gains but I don't know what the British taxman would take -- again, important to check.  

1 hour ago, yvonne denby said:

one option would be to rent the house out till then. then sell it and use the money to generate an income from 2028. but i understand there maybe capital gains tax to pay in australia in the gain made on the house from the date of arriving in australia to the date of sale?

If you are currently surviving on your husband's pensions, then I can understand why you're moving to live with your daughter.  However, as stated, my concern is that your husband's state pension will be frozen at whatever rate it is now, and he'll never get an increase.  Also whatever the amount you get when you start receiving your pension, that's the amount it will stay at for life. Obviously, the higher the amount is when you leave the UK, the better. So there would be an advantage to delaying your move, if you can afford to do so. 

Edited September 6 by Marisawright

[ramot]

2 hours ago, Marisawright said:

Yes, I understand that.  You will arrive in Australia on a tourist visa, then apply for the 804 visa.  You will receive a bridging visa when the tourist visa expires, and you will stay on that bridging visa for the rest of your life (because the waiting time for the 804 visa is about 30 years).

This is why you need expert advice.  It's residency, not citizenship, that decides most things tax-wise.  You won't be a resident of the UK any more, so I believe you'll pay UK tax on the rental income like a foreigner, which may mean different rates of tax -- but I'm not an expert, so you need to check that.  It's possible foreign investors don't even get a tax-free threshold, so that needs to be checked too.  Also, I'm not sure what Australian tax you're liable for on a bridging visa, so there's another question.  You probably wouldn't have to pay Australian capital gains but I don't know what the British taxman would take -- again, important to check.  

If you are currently surviving on your husband's pensions, then I can understand why you're moving to live with your daughter.  However, as stated, my concern is that your husband's state pension will be frozen at whatever rate it is now, and he'll never get an increase.  Also whatever the amount you get when you start receiving your pension, that's the amount it will stay at for life. Obviously, the higher the amount is when you leave the UK, the better. So there would be an advantage to delaying your move, if you can afford to do 

3 hours ago, yvonne denby said:

hi, thank you for your reply. my  daughter is a citizen in australia. i will be applying for an 804 visa. i will not receive my state pension untill 2028, hence no income at the moment. the rent will not exceed the uk tax threshold. this is why one option would be to rent the house out till then. then sell it and use the money to generate an income from 2028. but i understand there maybe capital gains tax to pay in australia in the gain made on the house from the date of arriving in australia to the date of sale?

As I mentioned in a previous reply, our circumstances were different probably to yours.  
Before we got PR, we were on the old long term temporary 410 retirement visa for 17 years, with originally no chance of PR. This gave us the right to live in Australia, but we were totally self funded, with no rights to Medicare or any support.  
As all our income comes from UK, we only paid UK tax.  Since we got PR  we now pay both UK and Australian tax. We have a rental property in UK. We use tax consultants who understand the international rules between the 2 countries.
As you will be on a bridging visa for a permanent visa, a different scenario to us, you need to contact Alan Collett who specialises in both UK & Australian tax.

Edited September 6 by ramot

[Alan Collett]

5 hours ago, yvonne denby said:

hi, thank you for your reply. my  daughter is a citizen in australia. i will be applying for an 804 visa. i will not receive my state pension untill 2028, hence no income at the moment. the rent will not exceed the uk tax threshold. this is why one option would be to rent the house out till then. then sell it and use the money to generate an income from 2028. but i understand there maybe capital gains tax to pay in australia in the gain made on the house from the date of arriving in australia to the date of sale?

Your understanding about capital gains tax is not correct.

You will have UK CGT to consider given what you are contemplating.

The attached tax factsheet might help in respect of Aus tax.

804-and-864-visa-applicants-holders-of-BVs-in-Australia-1.pdf