Renting Out Your Australian Property While Living in the UK: A Tax Guide (2025/26)
Moving to the UK while keeping your Australian property is increasingly common. You're building long-term wealth, preserving a foothold back home, and covering a mortgage with rental income. But the UK and Australian tax systems treat rental income very differently - and knowing which rules apply to you, and in what order, is important.
At AUK Tax, we help Australians in exactly this situation. Below, we work through the most common questions and conflicting UK and Australian tax rules when it comes to Australian Property Income.
Am I Taxed in the UK on My Australian Rental Income?
If you are UK tax resident, HMRC generally taxes you on your worldwide income, which includes rental income from your Australian property. Unfortunately, you cannot ignore it on the basis that the property and the tenants are in Australia.
There is, however, an important exception that many Australians moving to the UK will qualify for in their early years.
Could I Be Exempt From UK Tax on My Australian Rental Income? The FIG Regime
From 6 April 2025, a new Foreign Income and Gains (FIG) regime replaced the old non-domicile remittance basis system for expats. This was a significant change to UK tax, and it is directly relevant to most Australians arriving in the UK.
To qualify, you must not have been UK tax resident for at least 10 consecutive tax years immediately before your year of arrival. This applies equally to non-UK domiciled individuals and UK domiciled individuals - domicile status and prior non-dom history are irrelevant for FIG eligibility. Even British citizens who have lived abroad for over a decade can qualify.
For most Australians relocating to the UK, this condition is straightforward to satisfy.
If eligible, the FIG regime can be claimed for a maximum of four consecutive tax years, starting with the tax year you become UK resident. After this period, FIG benefits cease and there are no extensions beyond year four.
What does the FIG regime actually mean for your Australian rental income?
Qualifying individuals receive tax relief on their foreign income and gains for their first four tax years of UK residency, and can bring this money to the UK without incurring a tax charge (unlike the previous remittance basis rules). Your Australian rental income, being foreign-sourced income, falls directly within this relief.
In practical terms, if you qualify for FIG Relief and are within your first four UK tax years, your Australian rental income will be exempt from UK tax. On your your UK Self Assessment Return, you must complete the relevant boxes on the ‘Residence and foreign income and gains (FIG) regime etc’ pages (SA109) of your Self Assessment tax return and then claim the amount of relief on the relevant supplementary page.
There is one important trade-off. Individuals claiming the FIG regime lose their entitlement to the £12,570 tax-free personal allowance and the £3,000 capital gains annual exemption. The regime is therefore likely to be most beneficial for individuals with significant foreign income. Whether FIG Relief is worth claiming in your specific circumstances depends on the amount of your Australian rental income (and any other foreign sourced income) and your UK sourced income.
What If I've Been in the UK for More Than Four Years - or Don't Qualify for FIG?
Once the FIG period expires, or if you don't meet the qualifying condition / don’t want to lose your tax-free personal allowance entitlement, you are taxed on your worldwide income. Your Australian rental income must be declared on your UK Self Assessment return, and UK income tax applies. The UK income tax rates for 2025-26 are:
| Taxable Income | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 – £50,270 | 20% |
| £50,271 – £125,140 | 40% |
| Over £125,140 | 45% |
Your Australian rental income is added on top of your other UK income (such as your employment income), so it is likely to be taxed at your marginal rate.
What Expenses Can I Deduct Against My Australian Rental Income in the UK?
This is one of the most significant (and for Australian expats, most unwelcome) differences between the two systems.
Mortgage interest
In Australia, mortgage interest on a rental property is fully deductible against rental income. If you pay $20,000 a year in interest, you reduce your taxable rental income by $20,000.
In the UK, the treatment is different. Mortgage interest on a foreign (and UK) rental property is not deductible from rental income. Instead, you receive a 20% tax credit based on the interest paid, regardless of whether you are a basic, higher, or additional rate taxpayer. So if you pay £10,000 in mortgage interest, you receive a £2,000 credit to offset against your UK tax liability - not a reduction in the income you're taxed on.
For a higher-rate or additional-rate taxpayer, this is a material difference. In Australia, £10,000 of interest saves you tax at your marginal rate. In the UK, the same interest saves you a flat 20% credit, meaning a higher-rate taxpayer effectively carries a 20% gap in relief.
Other allowable deductions in the UK
Other expenses that are wholly and exclusively incurred in the letting of the Australian property can generally be deducted in arriving at your UK rental profit, including:
Property management and letting agent fees
Building and landlord insurance
Repairs and maintenance (not improvements)
Council rates, body corporate levies, and utility costs where not recharged to tenants
Accountancy fees relating to the property
The same distinction between revenue expenditure (repairs - deductible) and capital expenditure (improvements - not deductible against income) applies in the UK just as it does in Australia.
That said, the list of allowable deductions is not identical between the two countries, and some expenses deductible in Australia (in addition to Mortgage Interest) are treated differently under UK rules. When preparing your UK tax return, it's important to review your Australian property expenses through a UK lens, not simply carry across what the ATO accepts. Getting this wrong can mean either overstating your UK deductions or missing legitimate expenses entirely.
How Does the Australia-UK Double Tax Treaty Protect Me?
The Australia-UK Double Taxation Agreement (DTA) is the mechanism that prevents you from being taxed on the same income twice.
Under the DTA, Australia has the primary right to tax income from real property situated in Australia. If you have already paid Australian tax on your rental income, you can claim a Foreign Tax Credit on your UK Self Assessment return for the Australian tax paid, up to the equivalent UK tax on that same income.
In practice this means you should not pay the full rate of both countries' tax. But you may pay the higher of the two effective rates. Understanding which country's rate is higher - and in what circumstances the credit fully extinguishes the other liability, requires working through the numbers for your specific situation.
Do I Also Have Australian Tax Obligations?
Yes. Regardless of where you live, Australian-sourced rental income is taxable in Australia. The ATO taxes rental income from Australian property whether the owner is a resident, temporary resident, or foreign resident.
Your Australian residency status - which is determined by a series of ATO tests and is not automatically resolved by your move to the UK - determines the rate that applies and whether you can access the tax-free threshold.
Australian tax residents are taxed at progressive rates starting at 0% up to $18,200 (the tax-free threshold). Non-residents for Australian tax purposes pay non-resident rates from the first dollar, there is no tax-free threshold. The non-resident rate on income up to $120,000 is 32.5%, meaning a modest net rental income of $20,000 would attract $6,500 in Australian tax with no threshold relief.
Mortgage interest - where Australia is more generous
As noted above, mortgage interest is fully deductible in Australia against rental income. This often results in a negatively geared property, where deductions exceed rental income, producing a rental loss. For Australian tax residents, this loss can generally be offset against other income (subject to new proposed changes being passed). For non-residents, the loss is quarantined and carried forward for offset against future Australian-sourced income, including any future capital gain on the property (subject to new proposed changes being passed).
What Happens When I File My UK Tax Return?
Renting out a foreign property as a UK resident brings you within UK Self Assessment. You must register if you are not already, and file annually to declare the rental income and claim any applicable relief or foreign tax credits.
Key deadlines:
31 October — paper return filing deadline
31 January — online filing deadline (31 January 2027 for the year ended 5 April 2026)
5 October — deadline to notify HMRC if you need to register for Self Assessment for the first time
Penalties for late filing and late payment apply automatically, so these dates matter, particularly given that the Australian tax year (ending 30 June) and the UK tax year (ending 5 April) don't align, adding complexity when calculating foreign tax credits correctly.
What About Capital Gains Tax If I Sell?
In the UK, if you are UK resident and sell your Australian property, any gain is subject to UK Capital Gains Tax. The CGT rates on residential property are 18% (basic rate) and 24% (higher rate). However, under the DTA, Australia also has the right to tax the gain - and you can claim a Foreign Tax Credit in the UK for Australian CGT paid.
In Australia, Capital Gains Tax applies on the gain. Australian tax residents who have held the property for more than 12 months are generally entitled to a 50% CGT discount on the gain. Non-residents do not receive this discount on assets acquired after 8 May 2012 - the full gain is taxable at non-resident rates.
Foreign Resident Capital Gains Withholding (FRCGW) is also a practical issue to be aware of. From 1 January 2025, where a non-resident sells Australian real property the buyer is required to withhold 15% of the purchase price at settlement and remit it directly to the ATO. This is a withholding mechanism - it is credited against your eventual Australian tax liability, but it directly reduces your net settlement proceeds and must be factored into any sale planning.
Key Differences at a Glance
| Topic | UK Treatment | Australian Treatment |
|---|---|---|
| Taxed on Australian rental income? | Yes, if UK resident (unless FIG Relief applies) | Yes, always |
| Mortgage interest relief | 20% tax credit only - not a full deduction | Fully deductible against income |
| Negative gearing / rental losses | No equivalent | Available to residents; quarantined for non-residents |
| New arrivals' relief | FIG Relief - up to 4 years' exemption on foreign income | No equivalent |
| CGT discount /relief | Annual exempt amount of £3,000; subject to meeting qualifying conditions | 50% for residents on assets held 12+ months; subject to meeting qualifying conditions |
| Tax-free threshold | £12,570 personal allowance | $18,200 for residents; nil for non-residents |
Need Help Getting Both Sides Right?
The interaction between UK and Australian tax on rental property income is genuinely complex — particularly now that the FIG regime has changed the UK landscape, and given that the two tax years don't align, mortgage interest is treated differently in each country, and residency classifications in both jurisdictions can shift your position materially.
At AUK Tax, this is precisely what we do. Whether you need help establishing whether you qualify for FIG Relief, filing your UK Self Assessment, managing your Australian tax return, understanding your residency position in both countries, or planning ahead for an eventual sale - we can help you navigate both systems together.
This article is intended as general guidance only and does not constitute tax advice. Individual circumstances vary and the rules around FIG Relief, tax residency status, and overseas income are complex. Please contact AUK Tax for advice tailored to your situation.
AUK Tax — UK and Australian personal tax specialists. Offices in London and Sydney.