A landlord who lives abroad for more than 6 months of the year must pay tax on any income they get from renting out property in the UK. If the landlord is a company or trustee, the rules about their usual place of abode apply.
The tax is collected using the Non-resident Landlord Scheme.
Who needs to use the scheme
You will need to deduct tax from rent if you are:
- a letting agent
- a tenant who pays over £100 a week in rent and whose landlord lives abroad
If you’re a letting agent you must operate the Non-resident Landlord Scheme no matter how much rent you collect, unless HMRC has told you in writing that the landlord can receive the rent with no tax deducted.
If the landlord is a joint owner, tax is paid on their own share of rental income.
You’re considered a letting agent under the scheme if you:
- help the landlord run their UK rental business
- receive their rent or control where it goes
- live in the UK for more than 6 months a year
A letting agent can be an estate agent, solicitor, accountant or friend of the landlord. You’re not a letting agent if you only give a landlord legal advice or services.
Rental income can include money received for a wide variety of things such as:
- letting furnished, unfurnished, commercial and domestic premises or land
- use of the furniture in a rented property
- the grant of certain leases
- sporting rights, such as fishing and shooting permits
- allowing waste to be buried or stored on land
- allowing others to use the property — for example, where a film crew pays to film inside a person’s house
- grants to help with allowable expenses, such as repairs
- enterprise investment schemes
- caravans or houseboats that are not moved around
- insurance policies for non-payment of rent
- service charges
What you need to do if you’re a tenant
You need to register with HMRC for the Non-resident Landlord Scheme and deduct tax from your rent.
You will need to provide your:
- own name
- address
- landlords address
You also need to register with HMRC if you pay a UK representative of your landlord, such as a friend or family member, who isn’t a letting agent.
You don’t need to deduct the tax if HMRC has told you in writing that the landlord can receive the rent with no tax deducted, but you must still register with HMRC and complete an annual report.
What you need to do if you’re a letting agent
You must operate the Non-resident Landlord Scheme regardless of how much rent you collect unless HMRC has told you that the landlord can receive the rent with no tax deducted. You may still need to register and complete an annual report.
You need to complete form NRL4 to register for the scheme
Tenant-finders
If you’re a tenant-finder you don’t have to pay tax under the Non-resident Landlord Scheme if you collect your own fee for finding a tenant from rent payments and:
- rent is collected for no more than 3 months
- the tax is no more than £100
Example 1
Janet finds a tenant for a property rented at £500 per month. She collects 2 months rent to get her fee. The tenant then pays the rent direct to the landlord. After Janet has deducted her fee and expenses, the tax due is £60 so she does not have to operate the Non-resident Landlord Scheme.
Example 2
John finds a tenant for a property rented at £2,000 a year. John collects 6 months rent from which he recovers his fee and pays insurance and repairs. The tax due on the remainder is only £20, but because John collects more than 3 months rent he must operate the Non-resident Landlord Scheme.
Working out the tax you need to pay
To work out the tax you need to pay you must add up the total rent in the 3 months, include any uncleared cheques and money you paid to someone else at the landlord’s request.
Deduct any deductible expenses you paid in the quarter to give the net rent. Multiply the net rent by the basic rate of Income Tax.
HMRC may check that you have paid the right amount and interest may be charged on late payments.
Example
Julie is a tenant who paid £1,500 rent from 30 June to 30 September. This was made up as follows:
- £200 for plumbing repairs (expense paid by the letting agent)
- £100 to pay off the landlord’s loan
- £1,200 direct to her landlord
Because the plumbing repairs are a deductible expense they are not included in the calculation of the taxable amount.
The tax is paid on £1,300 at the basic rate of 20% — a payment of £260 is due to HMRC.
Julie has the right to recover this money from rent payments or other money owed to the landlord.
How to make a payment
You must send payment within 30 days of the end of each tax quarter — 30 June, 30 September, 31 December and 31 March.
When to send your reports
You must send a report each year by 5 July to HMRC and the landlord using form NRLY.
You must also provide your landlord with a certificate NRL6 each year by 5 July.
What you need to keep
You need to keep records for 4 years of:
- rent you’ve received (or paid, if you’re a tenant), with dates and amounts
- correspondence with the landlord if you’ve contacted them about where they usually live
- expenses you’ve paid, with dates, amounts and descriptions of the expenses, along with copies of invoices and receipts
Non-UK company landlords
The scheme will continue to operate even though the profits of a UK property business of a Non-UK resident company will come within the scope of Corporation Tax from 6 April 2020.
Find out more about how to pay the correct tax if you’re a Non-UK resident company.
Further information
You can find more guidance about using the Non-resident Landlord Scheme.
Contact HMRC for help and advice and to register for the NRL scheme.
Published 8 December 2014
