The Non resident landlord scheme is a way in which HMRC collects tax on rental income from UK property from landlord’s who usually live outside the UK.
Under the NRL scheme, letting agents are required to deduct tax from the rental income and pay it to Her Majesty’s Revenue and Customs (HMRC). If there’s no letting agent and the rent is more than £100 per month, the tenant must deduct tax from the Landlord’s rental income and pay to HMRC.
This article highlights the salient points that non-resident landlords need to be aware of, but just a reminder – we are not Tax Advisors, so as always, for specific tax advice you should seek independent advice from an accountant or tax advisor or HMRC.
Who is classed as a non resident landlord?
Non resident landlords are defined as people who have UK rental income and whose usual place of abode is outside the UK. For the purpose of the NRL scheme, landlords include individuals companies, and trustees. With partnerships, the partners are treated as separate landlords with respect to their portion of the rental income.
If you’re a husband and wife with joint ownership of a property and both have your usual place of abode outside the UK, then both parties must complete a separate application and send it to HMRC. Letting agents and tenants are only able to pay rental income with no tax deducted from the spouse(s) named on the HMRC authorities they hold. If only one spouse has a usual place of abode outside the UK, the NLR scheme only applies to that spouses’ portion of the rental income. The spouse whose abode is the UK does not fall within the NRL scheme and letting agents do not need approval from HMRC to pay the rental with no tax deducted.
How To Apply To Receive Your Rent Without Deductions?
However, the landlords who usually live overseas can apply to receive their rent without a UK tax deduction by completing the NRL1i form if you’re an individual, the NRL2i if the applicant is a company or NRL3i for trustees. These forms are all available on the HMRC website.
Non-resident landlords can apply using this form where:
- their UK tax affairs are up to date; or
- they have never had any UK tax obligations; or
- they do not expect to be liable to UK tax for the year in which the application is made.
Individual landlords can apply to receive their rent with no tax deductions if they live abroad for 6 months or 183 days or more in a tax year. The time abroad does not have to be a continuous period.
HMRC states that it is your usual place of abode, rather than non-residence that determines your eligibility to join the scheme. This means that for the purposes of applying to receive rent without deductions, it’s possible to be resident in the UK, but with a usual place of abode outside of the UK.
Approval of Non Resident Landlord Scheme Applications
If an application is approved, HMRC Charities, Savings & International will send a notice of approval to the landlord and to their accountant or tax advisor and letting agent or tenant.
If you are approved to receive the rental income with no tax deducted, this does NOT mean you are exempt from paying UK tax. It simply means that you will receive your rent from your agent or tenant without any tax deductions. The rent is still liable to UK tax and will need to be included in your HMRC UK Self-Assessment tax return.
Changing your Letting Agent
If you decide to change your letting agent (or tenant, if there’s no letting agent) you will need to write to HMRC Charities, Savings and International with details of the new letting agent or tenant because an approval notice held by your old letting agent (or tenant) cannot be transferred to your new agent (or tenant). Your new letting agent (or tenant) will then receive a new notice from HMRC Charities, Savings, and International – your new letting agent (or tenant) will have to deduct tax until they receive this notice.
Remember, tax is complicated. You can find more information on the HMRC’s website. You should always seek independent advice from a tax advisor or accountant. You might be interested to read our useful guide setting out what landlord’s can offset again tax in the UK.
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