Do you own a rental property in the UK but live overseas - or are you planning to move abroad?
If so, there is an important HMRC scheme you should be aware of: the Non-Resident Landlord Scheme (NRLS).
Many landlords assume that moving overseas simply means their letting agent can continue collecting the rent and transferring it to them in exactly the same way.
However, where a landlord's usual place of abode is outside the UK, special rules can apply to how their UK rental income is handled.
If you are already an overseas landlord, or you are preparing to relocate outside the UK while retaining a rental property here, it is worth checking your position before the move.
Planning to live overseas while retaining a UK rental property? Check how the Non-Resident Landlord Scheme may affect your rental income.
ALREADY LIVING OVERSEAS?
Has HMRC authorised your agent to pay your rent without deducting tax?
If you are unsure, it is worth checking. Simply living overseas, using an accountant or completing a UK tax return does not necessarily mean your letting agent has received the HMRC authority required to pay your rental income without deduction under the Non-Resident Landlord Scheme.
What is the Non-Resident Landlord Scheme?
The Non-Resident Landlord Scheme, often abbreviated to NRL Scheme or NRLS, is administered by HM Revenue & Customs.
It deals with the collection of tax from UK rental income where a landlord's usual place of abode is outside the UK.
Importantly, being a "non-resident landlord" for the purposes of the scheme is not necessarily the same as being non-UK resident for general tax purposes.
The key test for the NRL Scheme is your usual place of abode.
For individuals, HMRC normally regards someone who lives outside the UK for six months or more as having their usual place of abode outside the UK for the purposes of the scheme.
This means the NRL Scheme can potentially apply even if you:
still own a home or investment property in the UK;
retain a UK bank account;
regularly return to the UK;
have a UK mortgage; or
may be treated differently for other UK tax purposes.
Your individual circumstances matter, so tax advice should be obtained where necessary.
Your property may be in London, even when you are thousands of miles away. UK rental income can still remain subject to UK tax rules.
What happens to my rental income if I live overseas?
If the Non-Resident Landlord Scheme applies to you and HMRC has not authorised your letting agent to pay your rental income without deduction, your letting agent will generally be required to operate the NRL Scheme.
This means the agent may need to deduct tax at the basic rate of Income Tax from the relevant rental income after taking account of expenses that can be deducted under the scheme.
The agent then accounts for the amount deducted to HMRC.
The basic rate of Income Tax is currently 20%.
This can have an important effect on cash flow.
For example, an overseas landlord should not automatically assume that the full amount of rent collected from a UK property can always be transferred abroad each month.
IMPORTANT
Your letting agent cannot normally stop operating the NRL deduction simply because you tell them that you have submitted an application. The appropriate HMRC authority needs to be in place.
Can I receive my rent without tax being deducted?
Potentially, yes.
An individual non-resident landlord can apply to HMRC for approval to receive their UK rental income without tax being deducted by their letting agent or tenant.
Individual landlords normally apply using Form NRL1.
HMRC may approve an application where, for example:
the landlord's UK tax affairs are up to date;
the landlord has not previously had UK tax obligations;
the landlord does not expect to have a UK Income Tax liability for the relevant tax year; or
another relevant HMRC condition for approval is satisfied.
You can read the current HMRC guidance and access the application process here:
Yes.
If you know that you are going to relocate outside the UK, you do not necessarily need to wait until after you have moved.
HMRC permits eligible landlords to apply for approval before they leave the UK or before the letting begins.
From a practical property-management perspective, dealing with the issue early can make the transition easier.
If you know you are relocating, tell your managing agent as soon as possible so there is time to:
review your NRL position;
update your correspondence details;
request the letting-agent information you may need for your NRL application;
update your overseas residential address;
review rental payment arrangements; and
deal with any other management or compliance matters before you leave.
Does NRL approval mean my rental income is tax-free?
No. This is one of the most important points to understand.
HMRC approval to receive UK rental income without deduction under the NRL Scheme does not mean that the rental income becomes tax-free.
It means that the agent or tenant named in the HMRC authority can generally pay the relevant rental income to you without deducting tax under the NRL Scheme.
You remain responsible for dealing with your UK tax obligations.
For an individual landlord, this will commonly involve declaring UK property income through the appropriate UK tax process, such as Self Assessment where applicable, and paying any tax that is due.
Your actual tax liability may be different from the amount that would otherwise have been deducted under the NRL Scheme.
Approval to receive rent without NRL deductions does not remove your responsibility to declare UK property income and deal with any tax due.
What happens after HMRC approves my NRL1 application?
If your application is approved, HMRC will normally notify you and provide the relevant authority to your letting agent or tenant.
Only once the required HMRC authority is in place should the agent begin paying the relevant rental income without deduction under the NRL Scheme.
This is why we recommend dealing with your position before moving overseas whenever reasonably possible.
Do not assume that:
submitting NRL1 automatically stops deductions;
having an accountant automatically provides authority to your agent;
filing a Self Assessment return replaces NRL approval; or
an approval held by another joint owner automatically applies to you.
What if my property is jointly owned?
Joint ownership is an important point that can easily be overlooked.
For NRL Scheme purposes, owners are considered separately in relation to their respective shares of the rental income.
For example, if a husband and wife, civil partners or other joint owners own a London property and both have their usual place of abode outside the UK, each owner is treated separately.
If both want their respective rental income paid without NRL deduction, each would normally need the appropriate HMRC approval.
One owner's approval does not automatically cover the other owner.
It is also possible for the scheme to apply to one joint owner but not another, depending on each person's circumstances.
What if my property is owned by a company or trust?
The Non-Resident Landlord Scheme is not limited to individual landlords.
It can also apply to:
companies;
trustees;
partnership arrangements; and
other qualifying landlords receiving UK rental income.
The appropriate application and tax treatment can differ depending on how the property is owned.
For example, HMRC provides different procedures for individuals, companies and trustees.
If your property is held through a company, trust or more complicated ownership structure, seek appropriate professional tax advice rather than assuming the individual NRL1 process applies.
What if I do not use a letting agent?
The NRL Scheme does not disappear simply because you manage the property yourself.
Where a tenant pays rent directly to an overseas landlord, the tenant may have obligations under the scheme.
In general, a tenant paying more than £100 per week directly to a non-resident landlord may need to deduct tax unless HMRC has authorised payment without deduction.
A tenant paying £100 per week or less generally does not have to operate the scheme unless HMRC specifically requires them to do so.
There is no equivalent £100-per-week exemption for a letting agent that is required to operate the scheme.
Planning to relocate overseas? Tell your managing agent
If you are currently living in the UK but are planning to relocate abroad, tell your managing agent as early as possible.
Your agent may need to update:
your principal residential address;
your correspondence address;
your telephone number and contact details;
your NRL status;
rental payment arrangements;
HMRC-related records;
emergency contact arrangements; and
other property-management information.
This is particularly important where the property will continue to be occupied by tenants while you are living abroad.
Good preparation before relocating overseas can make the ongoing management of your London rental property considerably easier.
Completing your NRL application? Request your agent's details
When completing an NRL application, HMRC may ask you to provide information about the letting agent or property manager who collects the rent for your property.
NRL APPLICATION
Ask your letting agent or property manager for the correct details
Your application may require details relating to the agent responsible for collecting or managing your rental income.
Contact your letting agent or property management team directly and request the current agency information required for your NRL application.
If CENTURY 21 London Central manages your property, please contact our property management team and we will provide the relevant information required for your application.
You should avoid relying on old emails or previously supplied agency details, as information can change.
If HMRC approves your application, please also ensure your managing agent has received the appropriate HMRC authority before assuming that rental income can be paid without deduction.
Managing a London property while living overseas
Tax is only one part of becoming an overseas landlord.
Living hundreds or thousands of miles away from your investment property can also make everyday management more complicated.
You may need someone in London to deal with:
tenant communication;
rent collection;
maintenance and repairs;
contractor access;
property inspections;
emergencies;
tenancy renewals and changes;
compliance documentation;
check-ins and check-outs;
deposit matters; and
re-letting the property when a tenancy ends.
A professional managing agent can provide a local point of contact and oversee these matters while you are abroad.
How we help overseas landlords
At CENTURY 21 London Central, we regularly work with landlords who live outside the UK.
Our role is not to provide tax advice. However, from a property-management perspective, we can help make managing a London rental property from abroad considerably easier.
LOCAL PROPERTY MANAGEMENT
A professional point of contact in London for your property and your tenant.
RENTAL ADMINISTRATION
Rent collection and day-to-day administration of the tenancy, subject to the agreed management service.
MAINTENANCE SUPPORT
Coordination of reported maintenance issues and contractors while you are overseas.
ONE LOCAL POINT OF CONTACT
A London-based property professional who understands your property and can communicate with you wherever you are in the world.
OVERSEAS LANDLORD?
Let us look after your London property while you are abroad
Whether you are preparing to relocate or already live overseas, speak with CENTURY 21 London Central about professional property management in London.
If you already live outside the UK and receive income from a UK rental property, ask yourself:
Has HMRC authorised my letting agent to pay my rental income without deduction under the Non-Resident Landlord Scheme?
If you are unsure, speak with your managing agent and check your records.
If necessary, seek advice from an accountant or suitably qualified tax adviser who can review your personal tax position.
Useful HMRC resources
For current rules, forms and detailed tax guidance, always refer directly to HMRC.
Frequently asked questions about the Non-Resident Landlord Scheme
What is the Non-Resident Landlord Scheme?
The Non-Resident Landlord Scheme is an HMRC scheme dealing with UK rental income received by landlords whose usual place of abode is outside the UK. Where the scheme applies, a letting agent or qualifying tenant may have to deduct tax from rental income unless HMRC has authorised payment without deduction.
Am I a non-resident landlord if I move abroad?
Potentially. For the purposes of the NRL Scheme, HMRC looks at your usual place of abode rather than relying solely on your general UK tax-residence status. HMRC normally regards an individual who lives outside the UK for six months or more as having a usual place of abode outside the UK.
Is the NRL Scheme optional?
No. Where the scheme applies, the relevant letting agent or tenant has obligations under HMRC rules. However, an eligible overseas landlord can apply to HMRC for approval to receive rental income without tax being deducted at source.
How much tax can a letting agent deduct?
Where deductions are required under the NRL Scheme, tax is generally calculated using the basic rate of Income Tax on the relevant rental income after allowable expenses are taken into account under the scheme. The basic rate is currently 20%.
What is Form NRL1?
NRL1 is the HMRC application used by an individual non-resident landlord who wants to apply to receive UK rental income without UK tax being deducted by their letting agent or tenant.
Can I apply for NRL approval before I move abroad?
Yes. Eligible landlords can apply before leaving the UK or before the property begins to be let. If you know you are relocating, dealing with the application early can help avoid unnecessary disruption to rental payments.
What agency details do I need for my NRL application?
HMRC may ask for information about the letting agent or property manager responsible for collecting your rent. Ask your current managing agent directly for the correct agency details required for your application rather than relying on information from an old tenancy or previous correspondence.
Can my agent stop deducting tax as soon as I submit NRL1?
No. Submitting an application is not the same as receiving approval. Your letting agent should wait until the appropriate HMRC authority is in place before paying the relevant rental income without deduction under the scheme.
Does NRL approval mean my rental income is tax-free?
No. HMRC approval allows the relevant rent to be paid without NRL tax being deducted at source. It does not make the rental income exempt from UK taxation. You remain responsible for declaring your UK property income and paying any tax due.
Do joint owners need separate NRL approval?
Joint owners are considered separately. If two individual joint owners both fall within the NRL Scheme and both want their respective shares of rental income paid without deduction, each will normally need their own appropriate HMRC approval.
Does the NRL Scheme apply if I do not use a letting agent?
It can. A tenant who pays rent directly to an overseas landlord may have obligations under the scheme. In general, a tenant paying more than £100 per week may need to deduct tax unless HMRC has authorised payment without deduction.
Do I still need to submit a UK tax return?
NRL approval does not remove your responsibility for your UK tax affairs. Depending on your circumstances, you may need to declare your UK property income through Self Assessment or another applicable tax process. Speak with a qualified accountant or tax adviser regarding your individual position.
Should I tell my managing agent when I move overseas?
Yes. Tell your managing agent as early as possible and provide your new residential and correspondence details once confirmed. This allows the agent to review whether the NRL Scheme applies and to keep management and contact records up to date.
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This article provides general information about the Non-Resident Landlord Scheme and property management only. It does not constitute tax, accounting, financial or legal advice. Tax treatment depends on individual circumstances and legislation and HMRC guidance can change. Landlords should refer to current HMRC guidance and obtain advice from a suitably qualified accountant, tax adviser or other professional where appropriate. CENTURY 21 London Central does not provide tax advice.
