Letting out property abroad can be a great way of generating extra income.
The property might have been bought primarily as an investment but for others or it could be second or holiday home let out when not in use.
There are plenty of things to think about, though. Different countries have different rules on renting out properties, and you may have to obtain and pay for licences.
You will also have to consider how you will manage the property remotely and the many other issues from insurance to maintenance.
Another important thing to think about is tax.
There are already a number of issues to consider, but now Making Tax Digital (MTD), the UK's government initiative that aims to revolutionise the way that we all report and pay tax, is changing the landscape again.
Making Tax Digital for landlords will require regular reporting of your finances using MTD-compatible accounting software, such as that offered by Sage, or a '�bridging' software that can take data from sources such as spreadsheets and make it accessible to HMRC's own software.
Using a good accounting software package has a number of benefits, including allowing you to manage your bookkeeping, invoicing and expenses all in one place '� which also helps you to keep on top of your tax affairs.
MTD currently applies to businesses registered for VAT. As the staged rollout continues, most individuals currently using Self-Assessment will have to make the change to MTD by April 2024 for income tax accounting and reporting.
This includes landlords, but only generally if the income from their properties is greater than �10,000 per year.
MTD also applies to sole traders, however, and the incomes from the rental and any sole trader businesses are combined for the purposes of tax reporting under MTD. This also applies to rental income from foreign (non-UK) property.
There's a difference between making a mistake and deliberately trying to avoid tax, of course, but even making an honest mistake can land you in hot water.
One of the key differences between the existing tax reporting system '� which is generally done annually '� and MTD is a '�regular obligation' to provide quarterly updates.
If you fail to meet submission deadlines, you will accumulate '�penalty points', and if these build up, fines will automatically be applied. A new penalty system is also set to be introduced for late payments.
Letting property abroad also has a number of tax considerations that are not specifically connected to the change to MTD, beyond the requirements to make regular update submissions.
And there may be local taxes on foreign properties to be aware of, for example, which could include purchase taxes, tax on sales, income tax on rents, and annual taxes related to the property value.
Also, you may end up being taxed twice on your rental income, but you can normally claim tax relief to get some, if not all, of this tax back.