If you’re a landlord living abroad and renting out property in the UK, the Non-Resident Landlord (NRL) Scheme is something you must be aware of. Designed by HMRC, the scheme ensures that UK tax is correctly paid on rental income earned by landlords who live outside the UK for more than six months a year.
Who Is a Non-Resident Landlord?
You are classed as a non-resident landlord if:
- You live outside the UK for more than 6 months in a tax year.
- You rent out residential or commercial property in the UK during this time.
This applies whether you’re:
- An individual
- A company
- Part of a trust or partnership
How Does the NRL Scheme Work?
Under the Non-Resident Landlord (NRL) Scheme:
- Letting agents (or tenants, if no agent is involved) must deduct basic rate income tax (currently 20%) from the gross rent — that means the full amount of rent before any expenses like mortgage interest, repairs, or agent fees.
- The deducted tax must be paid to HMRC quarterly, using special payment reference numbers.
Quarterly Deadlines:
Letting agents or tenants must pay the tax to HMRC by the following dates:
- 30 June
- 30 September
- 31 December
- 31 March
Summary of Key Points:
- Tax is deducted from gross rent.
- 20% basic rate tax must be withheld (unless HMRC has approved gross payment).
- Tax is paid quarterly to HMRC by the agent or tenant.
- The landlord still has to declare the rental income via Self Assessment, even if tax was deducted at source.
How to Receive Rent Without Tax Deduction
To avoid deductions and receive your full rent (gross), you can apply to HMRC using one of these forms:
- NRL1 – for individuals
- NRL2 – for companies
- NRL3 – for trusts or other entities
If HMRC approves your application:
- You’ll receive 100% of the rent with no tax withheld.
- But you’re still responsible for declaring and paying tax through the Self Assessment system.
Your Tax Responsibilities as a Non-Resident Landlord
Even if you receive gross rental income, you must:
- Register for Self Assessment
- File a UK tax return annually
- Pay any tax due on your rental profits
- Keep proper records of income and allowable expenses such as:
- Letting agent fees
- Repairs and maintenance
- Insurance and mortgage interest (on qualifying loans)
You may also be eligible for the UK personal allowance (£12,570 for 2024/25), depending on your nationality and whether your home country has a double taxation agreement with the UK.
Key Points to Remember
- You must register with HMRC under the NRL Scheme.
- Letting agents or tenants deduct tax from gross rent unless exemption is granted.
- Even with gross payment approval, you must report rental income to HMRC.
- You may qualify for the UK personal tax allowance based on your residency and treaty status.
Final Thought
Being a non-resident landlord comes with UK tax obligations but with the right setup, it’s easy to stay compliant. Applying for gross payment status can simplify your finances, but make sure you still submit accurate tax returns.
If you’re unsure how the scheme affects you, it’s always a good idea to seek advice from a UK-based accountant or tax specialist with experience in non-resident landlord cases.