What is the Non-Resident Landlord Scheme?
Many British expats choose to keep a home in the UK, to move back to when it’s time to return, or to generate an income from whilst living abroad. Keeping a foothold on the UK property ladder can be helpful, and if you choose to rent out your home or another property you should be able to register for the Non-Resident Landlord Scheme to help ensure your agent or tenant can pay you your rental income without making an automatic 20% tax deduction at source whether or not that tax is actually due on the rental income you receive
The Non-Resident Landlord Scheme (NRLS) is used to deal with the tax obligations of those living overseas and earning rental income from a UK property. If you live outside the UK for more than six months of any tax year and rent out a property, you should apply to be treated as a non-resident landlord.
Once you are registered as a non-resident landlord, rather than your tenant or agent deducting 20% tax from the payments each time they pay you, you will pay tax on your rental income by submitting a Self Assessment Tax Return. This allows you to calculate the actual tax due and pay that tax over to HM Revenue in accordance with the Self Assessment payment dates – effectively delaying the payment of that tax.
Who classes as a non-residential landlord?
In the UK, you’re typically considered a non-resident landlord if you spend more than six months outside the UK in a tax year and receive rental income from a property in the UK. It’s always a good idea to consult with a tax adviser to determine your specific status for the scheme.
What do you need to do for the NRLS?
To comply you’ll need to follow a few key steps:
- Register with HMRC – before you begin renting your property, you’ll need to share details including your name, address, contact information, information about your UK rental property, and the details of your letting agent if you’re using one.
- HMRC will review your application – if approved, you’ll receive a unique reference number. This number is essential for your tenant and letting agent to ensure they comply with the tax regulations when paying rent.
- Declare all income – you must declare your rental income through your annual Self-Assessment Tax Return. Depending on your circumstances, you might qualify for tax relief or have allowable expenses that can be deducted from your rental income.
- Choose your preferred tax option – you’ll need to decide whether you want your tenants to deduct basic rate tax from the rent and pay it directly to HMRC or apply for approval for gross rent payments where the tenant pays the full rent to you without deducting tax.
- Keep good records – it’s crucial to maintain accurate records of your rental income, expenses, correspondence with tenants, and any relevant documents related to your property.
- Comply with reporting requirements – ensure you comply with HMRC’s reporting requirements, deadlines, and any changes in circumstances, such as contact details, property ownership, or residency status.
Is there non-resident landlord tax for companies?
The same rules apply to companies that are considered non-resident for tax purposes and own properties in the UK that they rent. Companies also need to register with HMRC and fulfil certain obligations. Depending on the country where the company is based, there might be tax treaties between that country and the UK that could affect the tax liability of the company. Professional advice here is key.
What are the obligations for tenants and letting agents?
If you’re registered with the NRLS and HMRC hasn’t granted approval for gross payment, tenants must deduct basic rate tax from the rent before paying it to you.
Tenants are responsible for paying the deducted tax quarterly and should be ready to share full details of the tenancy, including your information, to HMRC as requested.
Letting agents need to notify HMRC when they start or stop managing a property on behalf of any non-resident landlord. If your agent collects rent for you, they’re also responsible for deducting tax and paying it to HMRC on your behalf. Letting agents must maintain accurate records of rent collected, tax deducted, and any other relevant information related to the tenancy on your behalf.
Would you like to find out more?
We are here to help with your tax planning requirements. For more information, whatever your circumstances, please contact us today.