If you live abroad and rent out a property, your rental income is taxed under the non-resident landlord scheme. Many landlords are unaware of the NRL scheme until they receive a statement from their managing agent indicating that tax has been taken from their rent. It can be particularly unexpected for landlords who have recently relocated.
Our non-resident scheme landlord guide will explain how it works, your obligations, and what you need to do.
What Is The NRL?
The NRL scheme taxes overseas landlords’ rental revenue.
The plan requires letting agents operating for non-resident landlords withhold tax from rental income and pay it to hmrc quarterly. Hmrc must notify agents and renters in writing that a non-resident landlord has been permitted to receive their gross rental revenue without tax deductions.
Agents and tenants who fail to deduct taxes face large fines, while landlords who fail to pay their taxes face criminal tax evasion charges.
What Is Non-Resident Landlord Tax?
Non-resident landlords do not pay a separate tax. Notional revenue levy (NRL) scheme (20 percent of the gross rent less permitted deductible expenses – e.g agency fees or repairs).
Non-resident landlords report their rental income and expenses on the property pages of their self-assessment tax return (or file a corporation tax return if the property is owned by a registered company).
The NRL plan rules are different from the procedures for calculating your tax due as a landlord, therefore the tax deducted at the source is unlikely to match your real liability. In your self-assessment tax return, you can claim back any excess tax deducted from your rental income.
How Do You Get Your Rent?
To avoid cash flow difficulties, most non-resident landlords prefer gross rent. Individual landlords can file an NRL form with hmrc to get their rental income tax-free.
An agent can help you fill out the form, but they cannot file it on your behalf. A lack of timely filing or prior tax crimes may be the cause. If neither of these situations applies, getting clearance should be simple.
You will still be accountable for paying tax on your rental income, but you will be responsible for paying it rather than having the agent/tenant do it for you.
What Happens If Two Landlords Own A House But Live In Different States?
If a property is jointly held and one or more of the owners is a non-resident landlord, the NRL scheme applies to their share of rental revenue.
The arrangement treats each owner as a distinct landlord for their part of the rental income, even if they are spouses. Non-resident landlords must apply individually to the scheme for their gross share. The agent/tenant would have to withhold tax on half of the rental income if one party gained approval but the other did not.
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For non resident landlord tax property questions, please contact us via our website.