If you own a rental property in the UK but you are living abroad outside the UK for a period of 6 months or more, then you are an Overseas Landlord and need to register with HMRC and comply with the Non-Resident Landlords (NRL) scheme which sets rules around how you pay tax. The scheme requires UK letting agents to deduct basic rate tax from any rent they collect for non-resident landlords, which you can set off against your own tax bill at the end of the year.
What is classed as 'living' abroad?
- A Non-Resident Landlord is a person who has UK rental income and whose ‘usual place of abode’ is outside of the UK.
- Individuals who are outside of the UK temporarily (less than six months) are not Non-Resident Landlords.
- Non-Resident Landlords include members of the HM armed forces and other Crown Servants who are outside of the UK for over 6 months.
If Frost's or any other agent receives rent on behalf of a Non-Resident Landlord they have a statutory obligation to deduct 20% of the net income and make payments to the Inland Revenue on a quarterly basis.
In cases where properties are jointly owned, each individual is liable to pay tax. Both the income and the expenditure is split equally between the two parties.
When a Non-Resident Landlord receives rent direct from the tenant, the tenant has a statutory obligation to deduct 20% of the net income and make payments to the Inland Revenue on a quarterly basis. Tenants who pay less than £100 a week directly to a non-resident landlord do not have to withhold tax. However, they must make an annual return to HMRC declaring the rent they have paid.
Non-Resident Landlords can apply to the Inland Revenue for approval that will permit their letting agent not to deduct tax at source by completing an NRL1 form. However, approval of an NRL1 does not mean that the rent is exempt from UK tax and non-resident landlords must include it in any tax return the Inland Revenue sends them. Profits will remain taxable but receiving gross payments may improve cash-flow for the landlord.
In cases of a jointly owned property each owner must complete their own NRL1 application form.