Tax on foreign income - rental property

I am considering renting out my summerhouse in Denmark this summer. The income will be credited by the agency directly to my Danish bank account. The first part of the income (up to approximately dkr 46,000) is tax free in Denmark as is 40% of any other income stemming from the income from the rental of the summerhouse above the dkr 46,000. Danish tax will automatically be deducted in accordance with Danish tax rules on income from summerhouse rental when rented out via an agency (including above mentioned tax rules). I live in England and the income would not be transferred to the UK, but rather be used to pay off the mortgage on the summerhouse, property tax there etc. My question is: will I be liable to pay tax in the UK, and affirmatively, how would the above “deductibles” be treated in this connection?

Hi,

Yes, the UK/Denmark tax treaty allows the Danish tax authorities to tax your income from Danish property in Denmark. The treaty also allows the UK to tax this income as well. As a UK resident, you are taxed on your world-wide income, so you would need to convert the income and expenses for the property into pounds sterling (using a just and reasonable exchange rate) and declare gross profit, expenses and Danish tax deducted in a Self Assessment tax return.  

If you are non-domiciled, you can elect to use the remittance basis of tax, where you lose your personal allowances and declare your foreign income that you are not remitting to the UK. Have a look at section 9 of RDR1 as the remittance basis does not suit everyone. The rules for the remittance basis will change on 6 April 2025.

Residence, domicile and the remittance basis: RDR1
Technical note: Changes to the taxation of non-UK domiciled individuals

All of the above will need to be declared or claimed through a Self Assessment tax return. If you are not already registered, you can register here:

Check how to register for Self Assessment

Thank you.