Guidance

Which tenants should operate the Non-resident Landlords Scheme

Updated 10 November 2023

As a tenant of a non-resident landlord you may have to operate the Non-resident Landlords Scheme (NRLS) if the rent you pay on average is more than £100 per week and you pay rent to any of the following:

• a non-resident landlord
• a person outside the UK
• a person who is not a letting agent

If you pay rent into a non-resident landlord’s UK bank or building society account, you have paid it directly to the non-resident landlord.

You must also operate the NRLS if you receive a notice from HMRC telling you to do so.

You do not have to operate the NRLS if you pay rent to a person who has been told by HMRC to operate the NRLS.

Notices from HMRC

HMRC may send a notice to you telling you to operate the Scheme.

The notice will usually tell you:

• which landlords you must operate the Scheme for
• the date from which you must operate the Scheme

If you receive a notice you must operate the Scheme until either HMRC withdraw the notice or you stop being a tenant of the non-resident landlord.

Who should not operate the Scheme

You do not have to operate the NRLS if you either:

• pay rent to a letting agent in the UK or a person who has been told by HMRC to operate the NRLS
• pay rent of £5,200 or less per year, unless you get a notice from HMRC telling you to do so

If you arrange to occupy a property for part of a year, the £5,200 figure is proportionately reduced.

For example, if you have a lease to occupy property for 6 months in the year ended 31 March you do not need to operate the Scheme if you are due to pay £2,600 or less.

If you share a property with other tenants and each of you is named on the lease, the £5,200 limit will apply separately to each of you for your share of the rent. This will apply even if each of you are jointly and severally liable for all the rent payable under the lease. If you share a property with other tenants but only one of you is named on the lease, the £5,200 limit will apply to that person for all the rent payable.

The limit of £5,200 applies for each landlord. If you have several non-resident landlords, you must operate the Scheme only for those landlords who you need to pay more than £5,200 per year.

What you must do if the Scheme applies

If the Scheme applies to you, you must:

• tell HMRC
• send quarterly payments to HMRC for any tax due under the Scheme
• where you need to account for tax, provide your non-resident landlords with a certificate each year - you can use a copy of the certificate of tax liability (form NRL6)
• complete an annual information return, if appropriate
• keep records to show that you have complied with the requirements of the Scheme

You have the right to deduct any tax you have to pay under the Scheme from either:

• your rent
• any other money owing to the non-resident landlord

You also have the right to recover tax from the landlord where you did not deduct it from your rent, or other money owing.

Contacting HMRC

If you need to operate the NRLS, write to HMRC:

Charities, Savings & International 1
HM Revenue & Customs
BX9 1AU

You’ll need to give:

• your name and address
• the names and addresses of your non-resident landlords

This will allow HMRC to send you the forms and information you need in time for you to:

• complete returns
• make payments of tax

Calculation and payment of tax

If you need to operate the Scheme you must calculate the tax for each quarter. You must pay the tax due to HMRC within 30 days of the end of the quarter.

You do not need to calculate or pay tax on the rental income of a non-resident landlord if HMRC tells you the landlord is approved to receive rental income with no tax deducted. You should not accept a non-resident landlord’s statement that rental income may be paid without deduction of tax. You should only act on a notice from HMRC.

How to calculate the tax

You should calculate tax at the basic rate on:

• rental income you pay in the quarter to the landlord
• any payments you make in the quarter to third parties, where those payments are not ‘deductible expenses’

Quarterly returns and payment of tax

You must pay tax due each quarter to HMRC, using return form NRLQ.

Quarterly returns are due for the periods ending:

• 30 June
• 30 September
• 31 December
• 31 March

If you do not need to make a payment for a quarter, you do not need to complete a quarterly return form for that quarter. If you do not need to make a payment, you’ll only need to complete a return if you are told to by HMRC.

On the return you must include:

• which quarter the return form relates to
• the total amount of tax due on rental income

If you act for more than one non-resident landlord you should:

1. Calculate the tax due for each landlord separately.
2. You should then add together the amounts due.
3. Then subtract any repayable amount.

You should show the result of this calculation on form NRLQ.

The form explains how to send payment for the amount due to HMRC.

The return form NRLQ must be sent in time to arrive at HMRC no later than 30 days after the end of the quarter to which it relates. For example, form NRLQ for the quarter ending 30 September must arrive by 30 October of the same year.

The return form NRLQ must be sent in time to arrive at HMRC no later than 30 days after the end of the quarter to which it relates. For example, form NRLQ for the quarter ending 30 September must arrive by 30 October of the same year.

Find out how to send a quarterly return for your non-resident landlord tax to HMRC.

Interest payable on late payment

Where tax is due but you do not pay it by the due date, HMRC may charge interest from the date when tax became due until it is paid.

Assessments to recover tax

Under the NRLS, tax is payable without the need for the HMRC to make tax assessments.

HMRC may make an assessment if it has reason to believe that:

• an amount that should have been paid was not
• a quarterly return is incorrect

In these circumstances HMRC will make the assessment.

If HMRC makes an assessment it will give details of how you may appeal against it.

You should appeal in writing to HMRC within 30 days of the date of the assessment.

If the appeal cannot be settled by agreement between both parties, an independent appeal tribunal will hear it.

HMRC may charge interest on assessed Income Tax from the date when the amount became due until the date it is paid.

Repayments to tenants

Tenants account for tax on rent paid without deduction of expenses. As a result they cannot have excess expenses and no repayment of tax can be needed.

Making annual returns

If you need to operate the NRLS you must send an information return to HMRC by 5 July for the year to 31 March on form NRLY.

You must provide the following details separately for each non-resident landlord:

• the name and address of the non-resident landlord
• the total amount of rental income paid to the landlord and rental income paid away to third parties in the year to 31 March
• if you are not authorised to pay rental income to the landlord with no tax deducted:
  • the deductible expenses for the year to 31 March
  • the total tax payable in your quarterly returns for year to 31 March
• if you are authorised to pay the landlord with no tax deducted, the landlord’s approval reference number

If HMRC tells you that rental income may be paid to all your non-resident landlords with no tax deducted, you do not have to submit annual returns. This means you do not need to submit annual returns if:

• you’re a tenant of only one non-resident landlord
• you have authority to pay rental income with no tax deducted

However, for example, if you’re a tenant of 2 non-resident landlords and have authority to pay rental income with no tax deducted to one of them, you must submit a return for the other landlord

You must send annual returns on form NRLY. If you cannot download form NRLY or complete the online form, contact HMRC.

Penalties

Penalties may be charged if you either:

• fail to make a return
• make an incorrect return

Certificate you must give to the landlord

Where you’re liable to pay tax, you must provide each landlord with a certificate by 5 July, for the past year following 31 March.

The certificate must include:

• the non-resident landlord’s name and address
• which year the certificate relates to, ending 31 March
• your total tax liability for the year ended 31 March for the landlord

Certificates must include a declaration by you, confirming the details are correct and complete.

You may include extra information on the certificate if you wish. You can use a copy of the certificate of tax liability (form NRL6).

Non-resident landlords should keep certificates. When landlords complete their UK Tax Return they can set off the tax shown on the certificate against their overall UK tax liability.

This is providing the landlord has paid the tax shown on the certificate. Landlords may be asked to give the certificate to HMRC as evidence in support of their Self Assessment.

The amount of tax shown on the certificate may not be the same as the non-resident landlord’s tax liability for the profits of their rental business. The rules of the NRLS are not the same as the rules for taxing the profits of a rental business.