How the Non Resident Landlord Scheme works
The Non Resident Landlord Scheme is the HMRC system for collecting tax on UK rent paid to people whose usual home is abroad. Under the scheme, your letting agent must take basic rate tax off the rent, after allowing for the expenses they pay for you, and pass it to HMRC every quarter. If you have no agent and the rent is more than £100 a week, your tenant has to do the same.
The tax is paid to HMRC within 30 days of each quarter end. By 5/7 each year, the agent or tenant must send HMRC an annual return and give you a certificate showing the tax taken. You then use that certificate when you file your own UK tax return.
Being abroad for a while does not by itself make you non resident. The scheme looks at where your usual place of abode is. Your residence for income tax is decided separately under the statutory residence test, and the two can give different answers.
Applying to receive rent with no tax deducted
Most landlords abroad would rather receive the full rent and settle their tax through a UK self assessment return. You can apply to HMRC for approval to do this. Individuals use form NRL1, companies use NRL2 and trustees use NRL3. HMRC will normally approve it if the form is complete and correct and it is satisfied that you will meet all your UK tax obligations.
Once approved, HMRC writes to your agent or tenant to tell them to stop deducting tax. Until that letter arrives, they must keep deducting. Approval is not an exemption from tax. You still have to file a return and pay what is due by 31/1.
What is included
- Checking your position under the Non Resident Landlord Scheme
- NRL1, NRL2 or NRL3 applications for gross payment
- Annual UK self assessment return for rental income
- Personal allowance and tax treaty checks
- Letters to your agent or tenant about deductions
- Non resident capital gains tax returns within 60 days
- Catching up on missed years and disclosures
- Figures for your tax adviser in your country of residence
Your UK tax return as a landlord abroad
Each year you report your UK rental income and allowable expenses on a self assessment return, along with any other UK income. Expenses such as letting agent fees, repairs, insurance, service charges and ground rent are deducted in the normal way. Mortgage interest on a residential let gives a basic rate tax credit rather than a deduction, just as it does for UK landlords.
Whether you get the UK personal allowance depends on your nationality and where you live, and on any tax treaty between the UK and that country. Many landlords abroad do qualify, which can reduce or remove the tax due. We check this carefully, because it often makes the biggest difference to the bill.
You may also have to report the same rent in the country where you live. Most tax treaties let you claim credit there for the UK tax paid, so you are not taxed twice on the same income. We can work alongside your adviser abroad and give them the UK figures they need.
Selling a UK property while living abroad
Non residents must report the sale of UK property to HMRC within 60 days of completion, using a UK property return. This applies even when there is no tax to pay, which is a rule many people miss. Any tax due is paid within the same 60 days.
Special rules allow the gain on residential property owned before 6/4/2015 to be worked out using its value at 5/4/2015, so only the growth in value since then is taxed. Choosing the right method can make a real difference. If the property was once your main home in the UK, some relief may also be available. We look at each option before the return is filed.
Common mistakes by landlords abroad
Some landlords assume that because their agent deducts tax, they have nothing more to do. In fact the deducted tax is only a payment on account, and a return may still be required. Others stop filing returns after moving abroad, or never register at all when they first let their former home.
We also see agents deducting tax after approval has been given, because the HMRC letter was never received, and landlords who own through a company not realising that a non resident company pays corporation tax on UK rental profits rather than income tax. If you have fallen behind, HMRC's Let Property Campaign can be a better route than waiting for HMRC to write.
How we work with landlords overseas
Everything is handled by email and online, so it does not matter which time zone you are in. Many of our clients in this position own a flat in Fulham, Chelsea or Earls Court that they lived in before moving abroad for work, and they use a local agent to manage it. We ask for your agent's annual statement, your NRL certificate if tax was deducted, and mortgage and expense details, and we prepare your return from there.
Fees are fixed and agreed before any work starts, after a free review of your position. General questions can also be sent to [email protected].
Who this suits
- UK citizens who moved abroad and let their London home
- Overseas investors with buy to let flats in London
- Landlords abroad whose agent is deducting tax
- Non residents planning to sell a UK property
- Overseas companies and trusts holding UK rental property
Common questions
Do I pay UK tax on rent if I live abroad?
Yes. Rent from UK property is taxable in the UK wherever you live. You may still benefit from the personal allowance, depending on your nationality and residence, and you can usually claim credit in your new country for UK tax paid.
How do I stop my letting agent taking tax off my rent?
Apply to HMRC for approval to receive rent without deduction, using form NRL1 if you are an individual. Once HMRC approves, it writes to your agent. Your agent must keep deducting until that letter arrives.
Do I still need to file a UK tax return if my agent deducts tax?
Often, yes. The tax taken by the agent may be more or less than you really owe. Filing a return lets you claim expenses and allowances and get back any tax overpaid.
What happens if I sell my London flat while living abroad?
You must report the sale to HMRC within 60 days of completion, even if there is no tax to pay. If there is tax, it is due within the same 60 days.
Is my tenant responsible for paying my UK tax?
If you have no letting agent and the rent is more than £100 a week, your tenant must deduct basic rate tax and pay it to HMRC, unless HMRC has approved you to receive rent in full.
I have not filed UK returns since I moved abroad. What should I do?
Put it right as soon as possible. We work out what is owed for each year and can use HMRC's disclosure routes, which usually lead to lower penalties than waiting for HMRC to find out.
Does a non resident company pay income tax on UK rent?
No. A non resident company with UK rental profits pays corporation tax and files a company tax return with HMRC instead.