How tenants and letting agents in the UK pay tax on behalf of landlords abroad under the Non-resident Landlord (NRL) Scheme.
The Non-resident Landlord Scheme
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 (NRL) Scheme.
The tax can be paid by either:
- a letting agent
- the tenant
If the landlord is a joint owner, tax is paid on their own share of rental income.
If your landlord lives abroad and you pay over £100 a week, you need to register with HMRC and deduct tax from your rent.
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’t a letting agent.
You don’t 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.
If you’re 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. You may still need to register and complete an annual report.
You’re 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’re 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 - for example, where a film crew pays to film inside a person’s 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
If you’re a tenant-finder you don’t 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 £100
Janet finds a tenant for a property rented at £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 £60 so she does not have to operate the Non-resident Landlord Scheme.
John finds a tenant for a property rented at £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 £20, but because John collects more than 3 months rent he must operate the Non-resident Landlord Scheme.
What you need to do
1. Register with HMRC within 30 days.
2. Work out and pay the tax.
Send payment within 30 days of the end of each tax quarter - 30 June, 30 September, 31 December and 31 March.
3. Send a report each year by 5 July to HMRC and the landlord using form NRLY.
4. Provide the landlord with a certificate NRL6 each year by 5 July.
5. Keep records for 4 years.
You need to keep records of:
- rent you’ve received (or paid, if you’re a tenant), with dates and amounts
- correspondence with the landlord if you’ve contacted them about where they usually live
- expenses you’ve paid, with dates, amounts and descriptions of the expenses, along with copies of invoices and receipts
How to work out and pay the tax
Add up the total rent in the 3 months, include any uncleared cheques and money you paid to someone else at the landlord’s request.
Deduct any deductible expenses you paid in the quarter to give the net rent. Multiply the net rent by the basic rate.
HMRC may check that you have paid the right amount and interest may be charged on late payments.
Julie is a tenant who paid £1,500 rent from 30 June to 30 September. This was made up as follows:
- £200 for plumbing repairs (expense paid by the letting agent)
- £100 to pay off the landlord’s loan
- £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 £1,300 at the basic rate of 20% - a payment of £260 is due to HMRC.
Julie has the right to recover this money from rent payments or other money owed to the landlord.
More guidance can be found in the Guide to the Non-Resident Landlord Scheme.
Contact HMRC for help and advice and to register for the NRL scheme.