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Non-Resident Landlord Scheme
24 December 2014
Do you own property in the UK and live abroad? Are you a tenant who rents property from a landlord who lives outside of the UK?
You may find this article very useful.
INFORMATION FOR LANDLORDS
If you own property in the UK that is rented out, you have obligation to pay tax on any rent you receive from such property.
If you live abroad for 6 months or more per year (whether you are or you are not the UK citizen), you're classed as a ‘non-resident landlord' by HM Revenue and Customs (HMRC) even if you're a UK resident for tax purposes.
USING LETTING AGENT
By law, your letting agent has to deduct 20% tax from your UK rental income and pay it to HM Revenue & Customs (HMRC).
Example (based on monthly received rent):
Your agent lets your property out at £1,000
Their monthly management fee is 10% + VAT = £120
Letting income is £880
They have to pay 20% tax to HMRC on £880 which is £176
You will receive from your agent £704
LETTING OUT DIRECTLY TO A TENANT
The same applies if you are not using any letting agent. Tax of 20% has to be paid. In such circumstances, your tenants, if they pay rent of more than £100 a week to you as a non-resident landlord, must deduct tax from your UK rental income and pay the tax to HRMC.
If we used the example above where rental income is £1,000, your tenant has to deduct £200 from your rent and pay to HMRC.
RECEIVING RENT IN FULL
However, if you want to receive your rent from your agent in full and pay your tax later through own self-assessment, you have to register with Non-resident Landlord Scheme. You can do so by applying for approval to receive rental income with no tax deducted by completing NRL1i form.
Joint applicants, for example husband and wife, have to complete separate forms.
It usually takes 3-4 weeks to process the form (it may be quicker than that though) so allow enough time before your property is let out. Once you receive the approval number, you have to provide it to your agent. As soon as your agent receives the approval number, they will be able to forward you rent in full; without 20% tax deduction.
You will have to complete your self-assessment at the end of the tax year. Please talk to your accountant. If you need an accountant who is skilled in this area, please contact us and we will be able to put you in touch with experts in this field.
INFORMATION FOR TENANTS
If your landlord is classed Non-resident Landlord and you pay rent of more than £100 a week, you must deduct 20% tax before you pay to your landlord and pay the tax to HRMC. To be able to do so, you have to be registered with Non-Resident Landlord Scheme.
Get in touch with us for further advice. Telephone +44 (0)1608 695252.
E-mail firstname.lastname@example.org .
Distinct Property Consultants are registered with Non-resident Landlord Scheme and specialise at dealing with overseas landlords who own properties in the UK.
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