For example, out of gross rent of £1,000, the letting agent/tenant deducts tax of £200 (20% of £1,000) and pay only £800 to the landlord.
Who is a Non-Resident Landlord?
Non resident landlords are the one who:
- Receive UK rental income and
- Have “usual place of abode” outside the UK.
In a tax year, if you are away from the UK for more than 6 months, your “usual place of abode” is outside the UK, and you are considered a non-resident landlord.
So, a person can be a UK resident for normal tax purpose but a non-resident landlord under Non Resident Landlord Scheme (NRLS).
Where letting agents and tenants are aware that the landlord mostly resides in the UK, no need to operate Non-Resident Landlord Scheme (NRLS).
If they are not sure about the place of abode, need to obtain sufficient information and contact Personal Tax International (PTI) if needed.
Can I Receive The Full Rent (No Tax Deducted)?
Yes. But you need to meet certain conditions:
- Your UK tax affairs are up to date, or you had no tax obligations and
- You are not expected to have any UK tax liabilities for the year in which the application is made
To get full rent, you need to ask for HMRC approval by sending a form:
- NRL1 form- for individuals
- NRL2 form- for companies
- NRL3 form- for trusts
It is not necessary that you should fill up the form by yourself. You can authorise us as your agent and we will submit the form to HMRC.
Does a Non Resident Landlord Need to Complete Self-Assessment?
The non- resident landlord receiving rental income from UK property must fill self assessment form (tax return).
While filling up self assessment, they need to settle any tax due or reclaim overpaid tax
Non Resident Landlord Tax for Companies
Companies with UK property business are considered non-resident landlords in a case where:
- Their main offices or other places of business are outside the UK or
- They are incorporated outside the UK.
Companies can get their rent without tax deduction. They need to fill out non-resident landlord forms-NRL2.
Does Non-resident Landlord Company Pay Corporation Tax or Income Tax on The UK Rental Income?
For non-resident landlord companies, HMRC required to pay income tax via self-assessment tax returns (like non-resident landlord individuals) before 6 April 2020.
But, after 6 April 2020, HMRC required the non resident landlord companies to pay corporation tax on UK property income and complete Corporation Tax Return as the UK resident companies do.
Which Tenants/Agents Need to Operate NRLS?
As a tenant/agent of a non-resident landlord, you may have to operate the Non-resident Landlords Scheme (NRLS) if the rent you pay on average is more than £100 per week to:
- A non-resident landlord or
- A person outside the UK or
- A person who is not a letting agent
Note: If HMRC sends you a notice to operate NRLS, you must do it irrespective of whether you meet the above conditions..
Which Tenants/Agents are Not Required to Operate The Scheme?
You do not have to operate the non-resident landlord scheme if you either:
- Pay rent to a letting agent in the UK (or someone who is operating NRLS)
- Pay rent of £100 or less per week (or £5,200 or less per year)
If you have a lease to occupy property for 20 weeks in the year ended 31 March 2022 you do not need to operate the Scheme if you are due to pay £2,000 or less.
Unlike the tenants, letting agents must operate the scheme regardless of the amount (even if it is £100 a week or less).
What are the obligations of a tenant/letting agent under NRLS?
All the letting agents (and tenants, if they come under NRLS scope) should follow below compliance requirements:
Registration for NRLS
They must register with PTI within 30 days of the date on which they are first required to operate the Scheme. Registration is compulsory even if HMRC has approved to receive rent in gross.
They can fill Form NRL4 available from the HMRC website. Failure to register within the deadline might lead to penalty.
They should deduct and pay tax to HMRC within 30 days of each quarter's end using NRLQ form (unless HMRC has approved in writing not to deduct tax).
They must fill up the total amount of tax due (or repayment due) in respect of all their non-resident landlords for that quarter.
They should provide an information return (NRLY form) to HMRC's Personal Tax International department by 5th July each year.
Tenants/letting agents should issue a certificate (form NRL6) disclosing the amount deducted, to the landlord each year.
What if There are More Than One Landlord?
For the property jointly owned by non resident landlords, NRLS still applies (except when each landlord is entitled to £100 or less).
Should Letting Agents Fill The Quarterly Return Even if No Payment is Due?
Normally, letting agents who are not required to make a payment of tax for any quarter do not need to complete a quarterly return form for the quarter.
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Frequently Asked Questions
Non-resident landlords meeting any of the following conditions will be entitled to personal allowance:
- The one who holds a British passport
- A citizen of a European Economic Area (EEA) country
- The one who has worked for the UK government at any time during that tax year
You might also get it if it’s included in the double-taxation agreement between the UK and the country you live in (personal allowance for non-resident landlords).
For individuals, the tax rate depends on the total income for that tax year and your eligibility for personal allowance as shown below:
NRL tax rates for Individuals
Entitled to Personal Allowance
(For Tax Year 2023/24)
Not Entitled to Personal Allowance
£12,571 to £50,270
£50,271 to £125,140
£125,140 and more
For a non-resident landlord company, the tax rate is 19-25%.
Letting agents should calculate tax at the basic rate on rental income less any deductible expenses.
Runal Ltd is due to collect rental of £10,000 a quarter for Manish, who is a non-resident landlord. In one quarter it collects only £5,000. It pays out £500 for plumbing repairs.
Below is the non resident landlord UK tax calculation:
Rental income received
Less deductible expenses paid
Basic Rate tax @20%
Note: Letting agents must not deduct excess expenses paid for one landlord from the rental income of another landlord.
You will be treated as letting agent if all the below conditions meet:
- You manage the property rental business on behalf of a non-resident landlord
- You receive rent from tenants on behalf of a non-resident landlord
- Your activity is not limited to provisions of legal advice or legal services for the non-resident landlord
- Your usual place of abode is in the UK
Therefore, it is more likely that you are required to fulfil obligations under NRLS.
You do not need to operate Non-Resident Landlord Scheme (NRLS) if:
- You collect rents for no more than 3 months and
- Tax payable would be no more than £100
Where tenant finder does not have to operate non-resident landlord scheme, landlord will receive rent without deduction of tax. But when the tenants subsequently pay directly to the landlord, they may have to operate the scheme and deduct tax.
Whether you are a landlord or tenant or a letting agent, you should be aware of NRLS guidelines. It helps you remain compliant with HMRC regulations and avoid fines.
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