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Any income earned in the UK is taxed, and that does not exempt you when your usual abode is outside the UK, or you are a foreign investor. Whilst you are classed as a non-resident, you remain a UK resident for tax purposes. If you are letting whilst outside the UK, your rental income will be taxed under the non-resident landlord scheme (NRLS).
This guide makes understanding your non resident landlord tax obligations easier, whether you are the landlord, letting agent, or tenant.
Non-Resident Landlord Definition
When you usually live outside the UK for over six months each year, you are classed as non-resident but remain treated as a UK resident for tax purposes. If you are letting a rental property whilst outside the UK, you are called a non-resident landlord (NRL). This is also the same for foreign investors who invest in UK properties for the lucrative rental market, who are then treated as a tax resident for this matter.
Non-resident landlords can be anyone, from an individual to a company, for as long as they earn rental income in the UK. Trusts running a property rental business will be considered an NRL when almost all of the trustee members reside abroad.
If you are a non-resident landlord, you have tax obligations to settle in the UK. This can be done by having a letting agent. If none, your tenant will have to do it for you.
Double taxation treaties exist to prevent you from getting taxed twice. See if your current country of residence has international tax agreement with the UK: What Is Double Taxation? Reliefs & List of Countries on Treaty.
What is Non-Resident Landlord Scheme?
To ensure that everyone pays tax on their UK rental earnings (despite living abroad), the HMRC non resident landlord scheme was implemented. This anti-tax evasion scheme started in 1996, targeting UK residents (outside the country for over six months) or foreign investors who rent a property in the UK for profits.
Earning in the UK, whether you are a resident or not, makes you a tax resident under the scheme. However, it can be challenging for HMRC to monitor your tax compliance if your usual abode is outside the UK. This scheme simplifies your international tax obligations.
Need to Know! Another of HMRC’s tax laws focused on rental tax compliance is the Let Property Campaign, implemented in 2013. This applies to you if you earn from letting UK property but have not reported it to HMRC, whether you are a resident or not. Learn how to disclose your rental income through our Let Property Campaign guide.
Responsibility of the Landlord
Under the scheme, you have two options as a landlord to fulfill your tax responsibilities:
- receive the rental income in gross and file self-assessments yourself, or
- if not gross, hire a letting agent to settle your taxes
If neither, your tenant may be required by HMRC to operate under the scheme. Seek non resident landlord scheme guidance from experts if you are unsure about how to proceed. Check out our guide for accidental landlords, too, a situation when you did not originally plan to be a landlord. Here, we guide you on what to do next.
Responsibility of the Letting Agent
Non-resident landlords may also appoint a letting agent to fulfill tax obligations on their behalf. Usually, it is a family member or a friend, but landlords can appoint any letting agent they can trust. Without a letting agent, HMRC may appoint a tenant to operate the NRLS. Responsibilities are the same with both the letting agent and the tenant. See below for more information.
Responsibility of the Tenant
If you are a tenant and pay rent to a letting agent, you will not be operating the NRLS. However, if you meet the following criteria, HMRC may ask you to do so:
- You send direct payment to your landlord (or another intermediary) whose usual abode is outside the UK.
- Your rent per week is over £100.
- Your landlord has no letting agent and did not apply to receive rent as gross income.
Once HMRC asks you to operate the NRLS, your obligation will be to:
- Register for the scheme.
- Withholding the right tax deduction.
- Pay at the end of every quarter using the non resident landlord tax form—NRLQ. The tax returns will be issued to you every time. Deadlines are:
- 30 June
- 30 September
- 31 December
- 31 March
- Send yearly report to HMRC through the form NRLY. The deadline is 5 July.
- Give your landlord a certificate NRL6 every year. The deadline is also 5 July.
- Keep all records up to 4 years (e.g., rent, fees, expenses, etc.).
If you are unsure about your landlord’s NRL status or how your specific circumstance works with the scheme, consult with a tax advisor.
How to Apply for Gross Rental Income
As a landlord, you have the option to receive your rental money as a gross income, but usually only if you have a good tax standing. See if you meet the following criteria before you apply with HMRC:
- Your tax obligations are updated.
- You have not had any UK tax obligations since.
- You anticipate your rental income will fall under the yearly tax-free threshold (personal tax allowance), hence, no tax bill coming to deal with.
You can apply either online or using the form NRL1. When the property is jointly owned, each of the non-resident landlords will have to separately apply for their rental income shares.
If HMRC grants your request, you will no longer need a letting agent or your tenant to operate the NRLS on your behalf. You receive the rental income in full amount and settle self-assessment returns yourself.
What Tax to Pay as a Non Resident Landlord
The tax on rental income you will be responsible for may be either:
- income tax (if you are an individual, a sole trader, or a trust)
- corporation tax (if you are a limited company)
You do not pay capital gains tax or National Insurance on your rental income.
Check out our guide on how to reduce tax on rental income.
How Much is the Non Resident Landlord Tax?
The non resident landlord scheme tax rate is the same as regular taxes. Non-resident landlords also benefit from a £1,000 trading income allowance, which applies on top of your personal tax allowance of £12,570. After that, you pay income tax rates (2024/25) as follows:
- Basic Rate: 20% from £12,571 to £50,270
- Higher Rate: 40% from £50,271 to £125,140
- Additional Rate: 45% above £125,140
See how your trading allowance works—check out our relevant article: Freelancers Tax UK. This serves as your helpful guide when you are both an employee under the Pay as You Earn (PAYE) system and a self-employed freelancer at the same time.
On the other hand, if you are a company, you are classed as a non-resident company under the scheme. You pay corporation tax and submit corporation tax return rather than income tax return. For the 2024/25 tax year, you pay:
- Small Profits Rate: A flat rate of 19% for profits less than £50,000
- Main Rate: 25% for profits more than £250,000
- Marginal Relief Fraction of 3/200 for profits between £50,000 and £250,000
Useful read: Corporation Tax Rates UK 2024/25 and Special Regimes
How to Pay Non Resident Landlord Tax
If you qualify to receive gross income of your rental pay, you only need to fulfill the following obligations as a landlord:
- Report your rental income and expenditure to HMRC via self-assessments.
- Calculate your UK tax deductibility, excluding your tax-deductible amount under NRLS.
You are responsible for managing your tax affairs, from paying your bills to claiming tax benefits, relief, or refund if any. Otherwise, your letting agent or tenant will do the job.
Useful read: Tips to Reduce Income Tax on Investments
What If There is More Than One Tenant?
Know that HMRC sets a £100 per week limit for each tenant based on their share of the rent. If your tenants exceed this limit, they will need to operate the NRLS, unless you opt to receive your rental profits in gross and manage the tax yourself.
For instance, if you have two tenants paying £150 weekly, with each responsible for £75, they do not have to follow the NRLS.
However, if one tenant holds the lease but lives with others and collectively pays more than £100 weekly, that tenant will need to meet NRLS obligations. The same goes for multiple tenants exceeding the limit; each of them will have to comply with the NRLS.
What If There is More Than One Landlord?
If you and another landlord jointly own a property, the £100 per week limit applies individually to each of you. You both need to register separately under the scheme. Once registered, the tenant pays each of you your equal share.
For instance, if the tenant pays £150 a week, you will each receive £75, which means neither of you needs to comply with the NRLS, whether the rent is paid weekly or monthly.
However, if the weekly rent exceeds the limit, even when split between you, the tenant must follow the NRLS. They will need to deduct the appropriate tax from their rent and pay it to HMRC every quarter.
What Are the Penalties Under the NRLS?
Penalties can be costly for the individual, company, or trust landlords if they exceed the weekly limit, fail to register with HMRC, and do not file a self-assessment tax return for that tax year to report their rental income from their UK properties.
Penalties for submitting tax returns late and not paying tax on your rental income on time vary, mainly based on how long the delay is. Take a look at the table below for specific penalty amounts:
| Length of Delay | Penalty for Late Tax Return Submission | Penalty for Late Tax Payment |
|---|---|---|
|
1 day |
£100 |
N/A |
|
30 days |
N/A |
5% of the tax bill unpaid at that date |
|
3 months |
£10 per day capped at £900 |
N/A |
|
6 months |
Whichever is higher between £300 or 5% of the tax bill |
A further 5% of the tax bill unpaid at that date |
|
12 months |
Whichever is higher between £300 or 5% of the tax bill (or 100% of the tax bill in some cases) |
A further 5% of the tax bill unpaid at that date (or 100% of the tax bill in some cases) |
If you fail to file your tax return on time for more than 3 months, you will face a one-day late filing penalty along with a £10 daily charge. Similarly, if you have not paid your taxes for more than 6 months, you will first incur a 30-day penalty of 5% and then another 5% on the remaining unpaid amount. You will continue to accrue interest on all outstanding taxes and penalties until you settle everything.
Useful read: Understanding Late Tax Return Penalty UK and What to Do
Other FAQs About NRLS
Yes, non-residents are subject to tax on UK residential property. Since April 2017, all residential property owned by foreign domiciled individuals, including through offshore companies or partnerships, is liable for Inheritance Tax (IHT).
Yes, you may need to complete a UK tax return if you are non-resident and have UK income, such as rental income from a property. However, the UK has double taxation agreements with many countries to help ensure you do not pay tax twice.
The 5-year rule for non-residents in the UK means you may be liable to pay tax on certain income or gains earned whilst you were non-resident, except for wages or employment income. This rule applies if you return to the UK after being non-resident for more than 5 years.
The non-resident tax allowance in the UK for 2024/25 is £12,570, and this amount will remain frozen until 2027/28. If your adjusted net income exceeds £100,000, your personal allowance is reduced by £1 for every £2 of income above that threshold.
Get Expert Tax Advice
Managing non resident landlord tax can be overwhelming if you have a lot more to deal with overseas. Seeking assistance from tax accountants will lessen your load and ensure you are complying with HMRC properly. Our tax advisers at Legend Financial are here to help you settle your NRLS tax obligations efficiently. Join our hundreds of satisfied clients—reach us today!
4 responses
If you are working abroad, is your income abroad used as part of the calculation of the tax bracket or only the rental income ?
The new rules for resident landlord’s restrict interest rate deductions to 20 percent of the revenue . Are the rules the same for non resident landlord’s.
HI James,
Thank you for your comments. It sounds like you have become a Non-UK resident while working abroad and as such the overseas income is excluded from the UK tax calculation. And as you have a UK based Residential Property – only the rental profits will be taxed in the UK.
Regarding the interest deductions, the rules are the same so there is no change there.
Should you require any further assistance, you may drop us an email on hello@legendfinancial.co.uk and one of our tax advisors will assist you.
Many thanks,
Good guide.
However, there was no reference to VAT?
Do non-resident Landlords renting UK property, need to pay VAT on a letting invoice to UK based Estate Agents ?
Thank you, Dawn, for your comments here.
In reference to your query about paying VAT on letting invoice, it would have to be paid as these rules are pointed out in section 6 of VAT Notice 741A. As the place of supply is in the UK for the service, then it would be payable.
I hope this answers your question, but if you would require more information or need further assistance, please drop us an email on hello@lgendifnancial.co.uk and one of our tax advisors will be in touch.
Many thanks,