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A landlord who lives abroad for more than 6 months of the year must pay tax on any income they get from renting out property in the UK. If the landlord is a company or trustee, the rules about their usual place of abode apply.

The tax is collected using the Non-resident Landlord Scheme.

Who needs to use the scheme

You will need to deduct tax from rent if you are:

• a letting agent
• a tenant who pays over 拢100 a week in rent and whose landlord lives abroad

If you鈥檙e a letting agent you must operate the Non-resident Landlord Scheme no matter how much rent you collect, unless HMRC has told you in writing that the landlord can receive the rent with no tax deducted.

If the landlord is a joint owner, tax is paid on their own share of rental income.

You鈥檙e considered a letting agent under the scheme if you:

• help the landlord run their UK rental business
• receive their rent or control where it goes
• live in the UK for more than 6 months a year

A letting agent can be an estate agent, solicitor, accountant or friend of the landlord. You鈥檙e not a letting agent if you only give a landlord legal advice or services.

Rental income can include money received for a wide variety of things such as:

• letting furnished, unfurnished, commercial and domestic premises or land
• use of the furniture in a rented property
• the grant of certain leases
• sporting rights, such as fishing and shooting permits
• allowing waste to be buried or stored on land
• allowing others to use the property 鈥� for example, where a film crew pays to film inside a person鈥檚 house
• grants to help with allowable expenses, such as repairs
• enterprise investment schemes
• caravans or houseboats that are not moved around
• insurance policies for non-payment of rent
• service charges

What you need to do if you鈥檙e a tenant

You need to register with HMRC for the Non-resident Landlord Scheme and deduct tax from your rent.

You will need to provide your:

• own name
• address
• landlords address

You also need to register with HMRC if you pay a UK representative of your landlord, such as a friend or family member, who isn鈥檛 a letting agent.

You don鈥檛 need to deduct the tax if HMRC has told you in writing that the landlord can receive the rent with no tax deducted, but you must still register with HMRC and complete an annual report.

What you need to do if you鈥檙e a letting agent

You must operate the Non-resident Landlord Scheme regardless of how much rent you collect unless HMRC has told you that the landlord can receive the rent with no tax deducted. You may still need to register and complete an annual report.

You need to complete form NRL4 to register for the scheme

Tenant-finders

If you鈥檙e a tenant-finder you don鈥檛 have to pay tax under the Non-resident Landlord Scheme if you collect your own fee for finding a tenant from rent payments and:

• rent is collected for no more than 3 months
• the tax is no more than 拢100

Example 1

Janet finds a tenant for a property rented at 拢500 per month. She collects 2 months rent to get her fee. The tenant then pays the rent direct to the landlord. After Janet has deducted her fee and expenses, the tax due is 拢60 so she does not have to operate the Non-resident Landlord Scheme.

Example 2

John finds a tenant for a property rented at 拢2,000 a year. John collects 6 months rent from which he recovers his fee and pays insurance and repairs. The tax due on the remainder is only 拢20, but because John collects more than 3 months rent he must operate the Non-resident Landlord Scheme.

Working out the tax you need to pay

To work out the tax you need to pay you must add up the total rent in the 3 months, include any uncleared cheques and money you paid to someone else at the landlord鈥檚 request.

Deduct any deductible expenses you paid in the quarter to give the net rent. Multiply the net rent by the basic rate of Income Tax.

HMRC may check that you have paid the right amount and interest may be charged on late payments.

Example

Julie is a tenant who paid 拢1,500 rent from 30 June to 30 September. This was made up as follows:

• 拢200 for plumbing repairs (expense paid by the letting agent)
• 拢100 to pay off the landlord鈥檚 loan
• 拢1,200 direct to her landlord

Because the plumbing repairs are a deductible expense they are not included in the calculation of the taxable amount.

The tax is paid on 拢1,300 at the basic rate of 20% 鈥� a payment of 拢260 is due to HMRC.

Julie has the right to recover this money from rent payments or other money owed to the landlord.

How to make a payment

You must send payment within 30 days of the end of each tax quarter 鈥� 30 June, 30 September, 31 December and 31 March.

When to send your reports

You must send a report each year by 5 July to HMRC and the landlord using form NRLY.

You must also provide your landlord with a certificate NRL6 each year by 5 July.

What you need to keep

You need to keep records for 4 years of:

• rent you鈥檝e received (or paid, if you鈥檙e a tenant), with dates and amounts
• correspondence with the landlord if you鈥檝e contacted them about where they usually live
• expenses you鈥檝e paid, with dates, amounts and descriptions of the expenses, along with copies of invoices and receipts

Non-UK company landlords

The scheme will continue to operate even though the profits of a UK property business of a Non-UK resident company will come within the scope of Corporation Tax from 6 April 2020.

Find out more about how to pay the correct tax if you鈥檙e a Non-UK resident company.

Further information

You can find more guidance about using the Non-resident Landlord Scheme.

Contact HMRC for help and advice and to register for the NRL scheme.