If you invest in overseas property you must declare the profits in the UK. Unless you are classified as non-UK domiciled, you are taxed in the UK on all your income and gains wherever those profits arise.

If you let your overseas villa you should inform the tax authorities where the property is located, which may mean completing a tax return for that country, so you will need local tax advice. The property agent may also be required to deduct withholding tax from the rents, as a downpayment for the local income tax due.

The income and expenses from your foreign property need to be reported on the foreign income pages of your UK tax return. Any foreign tax you pay on that income can normally be off-set against the UK tax due, where a double taxation agreement exists between the UK and the country where the property is situated. Unfortunately you can’t reclaim foreign tax if the UK tax bill is lower.

Also be aware that other countries have different rules for tax deductible expenses, and may require rental profits to be calculated over the calendar year. This means you may need to draw up two different sets of property accounts.