If you own property in the UK and live abroad for more than six months, the Non-resident Landlord Scheme probably applies to you. Under it, your letting agent (or sometimes your tenant) takes basic rate Income Tax, 20% in HMRC's examples, out of the rent and pays it to HMRC. You can apply to HMRC to be paid the full rent instead. Either way, the rent is still taxable in the UK and you still have to report it.
This guide covers who counts as a non-resident landlord, who has to deduct tax, how to apply to be paid in full, and what you, your agent and your tenant each have to do.
Who counts as a non-resident landlord
HMRC's guidance says a landlord who lives abroad for more than 6 months of the year must pay tax on any income from renting out UK property. The scheme is how that tax is collected.
The test is not the same as your general UK tax residence. HMRC's Property Income Manual says the scheme looks at your usual place of abode. There is no statutory definition of that phrase, but the scheme applies to landlords who are outside the UK for a period that exceeds, or is expected to exceed, six months. The manual also says your residence status for other UK tax purposes does not decide the question. In practice, you can be caught by this scheme even if the rest of your UK tax position is more complicated.
The scheme covers individuals, companies and trustees. For partnerships, each partner is treated as a separate landlord.
Joint owners are taxed on their own share of the rent. If a couple own a flat 50/50 and only one has HMRC approval to be paid in full, the agent can still deduct tax from the other owner's half.
What counts as rent
HMRC's definition is wider than an ordinary tenancy. It includes letting furnished, unfurnished, commercial and domestic premises or land, use of furniture, service charges, insurance payments for non-payment of rent, sporting rights such as fishing and shooting permits, and money paid by a film crew to film inside a house.
Who deducts the tax
The person who handles your rent is your "representative" under the scheme. HMRC's regulations call this person a prescribed person. It is one of two people.
A letting agent. For this scheme, a letting agent is anyone who helps you run your UK rental business, receives your rent or controls where it goes, and lives in the UK for more than 6 months a year. That can be an estate agent, a solicitor, an accountant or a friend. Someone who only gives you legal advice or services is not a letting agent. A letting agent must operate the scheme however much rent they collect, unless HMRC has told them in writing that you can be paid with no tax deducted.
A tenant. If there is no agent and your tenant pays you directly, the tenant must deduct tax if the rent is over £100 a week. Tenants paying under £100 a week do not have to deduct tax unless HMRC tells them to. That £100 limit does not apply when rent goes through a letting agent. A tenant also has to register with HMRC if they pay a UK representative of yours, such as a friend or family member, who is not a letting agent.
Tenant-finders
A tenant-finder who takes their own fee from the rent does not have to operate the scheme if the rent is collected for no more than 3 months and the tax is no more than £100. HMRC gives two examples. Janet collects two months' rent on a £500-a-month property, and the tax due is £60, so she is outside the scheme. John collects six months' rent on a property let at £2,000 a year. The tax is only £20, but because he collects more than 3 months' rent he must operate the scheme.
A worked example
Suppose your property lets for £2,000 a month and your agent collects it. The agent deducts 20%, which is £400. You receive £1,600 and the agent pays £400 to HMRC.
HMRC allows the agent to deduct allowable expenses first. If the agent also paid a £200 repair bill that month, the agent works from £1,800 and withholds £360. Tax is worked out each quarter on the net rent, after deductible expenses, not on the headline figure.
HMRC's own example for a tenant runs the same way. A tenant paid £1,500 in a quarter: £200 of plumbing repairs paid by the agent, £100 towards the landlord's loan and £1,200 direct to the landlord. The repairs are deductible, so tax is due on £1,300 at 20%, which is £260. The tenant can recover that from the rent or other money owed to the landlord.
The withholding does not change the final tax you owe. It changes when HMRC gets paid, and so it changes your cash flow during the year.
Applying to be paid the rent in full
If you would rather receive the whole rent, you can ask HMRC for approval to be paid with no tax deducted. The forms depend on who owns the property:
| Owner | Form |
|---|---|
| Individual | NRL1 |
| Company | NRL2 |
| Trustee (trust or estate) | NRL3 |
HMRC's NRL1 guidance says it will normally approve an application if the form is complete and correct and it is satisfied that you will follow all your UK tax obligations. It may refuse if it is not satisfied on either point.
How the NRL1 application works
- You can apply online, or fill in the form on screen, sign it and post it. The landlord must sign the paper form.
- If you want a tax agent to act for you, do not use the online service. Send HMRC an Authorising your agent (64-8) form with the paper application.
- Give your principal residential address. If you only have a 'care of' or PO Box address, HMRC will accept a correspondence address, but you should attach an explanation.
- Give your Unique Taxpayer Reference and National Insurance number if you have them, and the reference number of your letting agent if you use one.
What happens next
HMRC sends a notice of approval to you, or to your tax agent. It also sends a separate notice to any tenants or letting agents named on the form, authorising them to pay without deducting tax. The notices show an approval reference number and the date from which rent should be paid in full. That date will usually be the first day of the quarter in which HMRC received your application.
Approval is checked in more detail after the first approval, and HMRC may ask for more information. If you do not provide it, approval can be withdrawn. If HMRC refuses, it sends a notice explaining how to appeal. You should appeal in writing within 90 days of the date of the notice.
Do not assume approval is automatic. Ask your agent to confirm in writing from which date they will stop deducting.
Approval is not an exemption. HMRC's manual says granting it does not remove the UK tax liability. Your tax is dealt with through Self Assessment.
What the letting agent has to do
A letting agent registers for the scheme using form NRL4. After that:
- Quarterly. Each quarter ends on 30 June, 30 September, 31 December or 31 March. The agent pays the tax withheld within 30 days of the end of the quarter, using form NRLQ. If there is no tax due in a quarter, no quarterly return is needed unless HMRC issues a notice.
- Annually. The agent sends an annual return on form NRLY by 5 July. Agents must do this even if they are authorised to pay all of their landlords in full.
- Certificate. HMRC's guidance says the landlord must also receive a certificate, NRL6, each year by 5 July.
- Records. Keep records for 4 years: rent received with dates and amounts, correspondence with the landlord about where they usually live, and expenses with invoices and receipts.
HMRC may check that the right amount was paid, and interest may be charged on late payments.
What the tenant has to do
A tenant who has to deduct tax registers with HMRC, giving their own name and address and the landlord's address. They work out the tax each quarter, pay it within 30 days of quarter end, and send the annual NRLY report and the landlord's certificate by 5 July. They keep the same records for 4 years.
A tenant who has been told in writing that the landlord can be paid in full does not deduct tax. They must still register with HMRC and complete an annual report.
What you still have to do as the landlord
The rent is still taxable in the UK even if tax has been withheld. An agent's deduction does not settle your position for good. You may still owe more, or you may be able to reclaim tax if too much was withheld.
Individuals normally report rental income on a Self Assessment return, using the property pages (SA105). Paper returns are due by 31 October and online returns by 31 January after the tax year. Our guide to Self Assessment deadlines and penalties sets out the dates in full. To work out your taxable profit, see landlord expenses you can claim.
Companies are treated differently. The profits of a UK property business run by a non-UK resident company have come within Corporation Tax since 6 April 2020, and the scheme continues to apply alongside that. A company files a Company Tax Return rather than an individual return.
Some non-resident landlords may qualify for a personal allowance. Whether you do depends on your nationality, residence and treaty position, so check it for your own case.
Keep thorough records of rent, expenses, agent statements, HMRC notices and the certificates you receive.
Tax in your home country
HMRC's manual is clear that UK rent remains taxable in the UK. No double taxation convention hands that right to a foreign tax authority. If your country of residence taxes the same rent again, it may give you double taxation relief. How that relief works depends on the rules there, so ask an adviser in that country as well as one in the UK.
When to get an accountant involved
A straightforward single let through an agent is manageable on your own. Get advice if you own the property through a company or trust, if you share ownership with someone who is in a different position, if you are unsure whether you have spent more than six months abroad, or if tax is also due in the country where you live. An accountant can also apply for approval on your behalf. Remember that they must send a 64-8 with a paper NRL1 rather than using the online service.
Our property tax service covers accounts and returns for landlords and property companies.
Frequently Asked Questions
Do I still have to file a UK tax return if my agent deducts tax?
Yes. The deduction is a payment on account, not an exemption. You report the rent on your return and claim credit for the tax withheld.
Does the £100 a week rule apply if I use a letting agent?
No. HMRC's manual says there is no de minimis limit for rent paid to a landlord through a letting agent.
When does a tenant have to deduct tax?
When there is no letting agent and the rent is over £100 a week, unless HMRC has told the tenant in writing that the landlord can be paid in full.
Can a friend or relative be treated as a letting agent?
Yes. If they help run your rental business, receive the rent or control where it goes, and live in the UK for more than 6 months a year, they count as a letting agent under the scheme.
Which form do I use to be paid the rent in full?
NRL1 for individuals, NRL2 for companies and NRL3 for trustees.