If you are a landlord with property in the UK but reside abroad for more than half the year, it’s obligatory to enrol in the Non-Resident Landlord Scheme. This also applies to your tenants, letting agents, or those who find tenants for you. The scheme, requiring registration with HMRC, is compulsory if you live outside the UK for over six months, and is not a matter of choice.
- Landlords residing abroad for over 6 months must register with HMRC.
- Tenants and letting agents are required to withhold tax and file annual returns.
- Registration for the scheme must occur within 30 days of the tenancy start.
- Rental income is reported through UK self-assessment or corporation tax forms.
- An NRL1i form allows for rent collection without tax deductions.
Table of Contents
- A Quick Start Landlord’s Guide to the Non-Resident Landlord SchemeJump
- Definition of a Non-Resident LandlordJump
- Guidelines for the Non-Resident Landlord SchemeJump
- Tenant ResponsibilitiesJump
- Application Process for Non-Resident Landlord SchemeJump
- Responsibilities of Tenant FindersJump
- Responsibilities of Letting Agents Paying Rent to a Non-Resident LandlordJump
- Application Process for Letting AgentsJump
- Non-Resident Landlord TaxationJump
- The HMRC Non-Resident Landlord Tax FormJump
- Explore Overseas Landlord Insurance OptionsJump
Definition of a Non-Resident Landlord
Non-Resident Landlords are property investors who live outside the UK for more than six months within a tax year. The Statutory Residence Test or other tax residence definitions are not applicable here. Instead, HMRC considers the landlord’s ‘usual place of abode,’ which may not necessarily be their primary or permanent residence.
Under this scheme, a landlord may be a UK tax resident but have their ‘usual place of abode’ in another country. Other examples include:
- Joint property owners, where only the Non-Resident Landlord’s share is eligible for the scheme.
- Overseas military personnel or Crown servants, such as ambassadors.
- UK property-renting companies with their main office or business location outside the UK.
A UK PO Box or ‘care of’ address alone does not suffice for a landlord to establish a usual place of abode in the UK.
Guidelines for the Non-Resident Landlord Scheme
If you are a landlord living outside the UK for over six months of a tax year, you must join the ‘Non-Resident Landlord Scheme.’ Letting agents, tenants, and tenant finders must pay any tax on rents due to the landlord, unless exempted by HMRC. Non-compliance may lead to fines.
Who Must Comply with the Scheme?
Unlike renting from a UK resident landlord, tenants renting directly from a Non-Resident Landlord must withhold tax and submit an annual return to HMRC.
Exceptions to the Scheme
The sole exception applies to tenants paying less than £100 a week directly to a Non-Resident Landlord or a non-agent third party. An annual return is still mandatory.
Application Process for Non-Resident Landlord Scheme
Tenants must register for HMRC’s Non-Resident Landlord Scheme within 30 days from the commencement of the tenancy. To apply, write to:HM Revenue and Customs
Charities, Savings and International Operations S0708
PO Box 203
By July 5, tenants should send a rent report to HMRC on a NRLY form and a NRL6 form to the landlord. Records of rent paid, correspondence with landlords, and details of any expenses paid for the landlord must be retained for four years.
Letting agents and tenants pay withholding tax to HMRC quarterly, at the end of June, September, December, and March.
Calculating the Tax to Withhold and Pay
- Sum any rent paid or requested to be paid to someone else.
- Deduct any expenses paid for the landlord, such as maintenance.
- Multiply the remaining figure by the basic tax rate – 20% for the 2021-22 tax years.
- James pays his landlord £1,300 a month rent from May to July 2017.
- During that time, he also pays £400 for insurance and £200 in electrical repairs for his landlord.
- His rent was £1,300 x 3 months = £3,900
- Deductible expenses were £600
- The taxable amount is £3,900 – £600 = £3,300
- The tax due is £3,300 x 20% = £660
Responsibilities of Tenant Finders
Tenant finders don’t have to withhold tax on rents collected in advance for the landlord, providing:
- Fees for sourcing tenants are deducted directly from the rent collected.
- The rent collected is for no more than three months in advance, and the tax due is less than £100.
- Emily finds a tenant who pays £550 a month to a Non-Resident Landlord.
- Emily collects three months’ rent from the tenant to cover her fee, and the tenant pays rent directly to the landlord from the fourth month.
- Emily’s fee and expenses amount to £700, and £80 tax is due on the remaining rent.
- Since the tax is less than £100, the transaction is exempt from the Non-Resident Landlord Scheme.
Tenants may be fined up to £3,000 for submitting incorrect returns to HMRC.
Responsibilities of Letting Agents Paying Rent to a Non-Resident Landlord
Letting agents must withhold tax on any rents they receive for a Non-Resident Landlord, regardless of the rent amount, and submit an annual return to HMRC.
Which Letting Agents Must Comply with the Scheme?
Anyone formally operating as a letting agent must apply for the scheme. This could also include anyone residing in the UK for over six months in a tax year who assists a Non-Resident Landlord in managing their property, such as a family member or friend.
Application Process for Letting Agents
Letting agents must register with HMRC’s Non-Resident Landlord Scheme within 30 days of the tenancy’s start. They must complete and submit an NRL4i form.
By July 5, agents must send a rent report to HMRC on an NRLY form and an NRL6 form to the landlord. Records of rent paid, correspondence with landlords, and details of any expenses paid for the landlord must be kept for four years.
Non-Resident Landlord Taxation
Non-Resident Landlords do not have unique tax returns. Individuals report their rental income and expenses on the UK Property pages (SA105) of the self-assessment return, while companies file a corporation tax return (CT600).
The HMRC Non-Resident Landlord Tax Form
Non-Resident Landlords wishing to receive rents without tenants’ or letting agents’ tax deductions can complete and submit an NRL1i form. Only the landlord can fill out the form, and HMRC may reject it if there is a poor history of filing returns and paying income tax.
HMRC will require confirmation of:
- Details of any properties being rented out in the UK.
- Personal details, such as a Social Security number.
- The duration a landlord plans to reside outside the UK.
- Contact information.
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