A guide to tax for non resident landlords tenants or those managing a landlord’s UK properties

What is a non-resident landlord?

If you spend more than six months outside of the UK, while owning a property as a landlord, you will be subject to non-resident landlord taxes. This applies to you if you don’t have a main or permanent residential property in the country but own a property that you rent out and acquire an income from.

Non-Resident Landlord Scheme Explained for Expats

If the tenant in your property pays more than £100 per week as their rent, they will qualify for this scheme. It also applies if you are a letting agent. If you are living outside of the UK for more than six months and yet own a property in the country, this scheme will apply to you. Non-resident landlords and or tenants must be a tax on the rent due for the landlord.

Non-Resident Landlord Scheme Application

The application process is simple and done on the gov.uk website. Tenants must register for the Non-resident landlord scheme within 30 days of their contract starting. Tenants also have a deadline of July 5, to send in a report to HMRC which is done on the NRLY form and a completed NRL6 form done by the landlord.

Non-Resident Landlord Scheme – Summary

The scheme is there so the government can avoid tax loopholes and undue asset protection. This is why tenants are also applicable to the scheme, because they could just as easily be a friend of the property owner, taking advantage of a house to themselves, while the owner isn’t in the country for the majority of the year. Any earnings from the property, be it a hotel, land or otherwise, is therefore taxed.

Non-Resident Landlord Scheme FAQ

I am tenant. What are my obligations?

If you are required to operate under NRLS then your obligations are simple. You must pay 20% tax on the rent agreed. If you pay £400 a month, the taxable rent for the tax quarter would be £1,200. The additional 20% would mean you pay £1,440 in total. However, the expenses are deductible.

If you paid the landlord £200 for repairs, you would do the following:  £1,000 – £200 = £800 + 20% = £960.

Tenants can face a maximum fine of £3,000 for wrongful filing. So be careful and ask for more information if you need to.

Are letting agents and tenants really allowed to deduct tax from my rent?

As shown above, yes they are. However, you have to show documented proof of expenses or repairs. Keep receipts, invoices and print off bank statements that show this particular financial instance.

Do I need to complete a UK tax return if I am non-resident?

Yes. You will need to declare any rental income via the same route i.e. the SA105 forms of the self-assessment return. This is if you are an individual. If you’re a business owner, you need to do this on the corporation tax return form CT600.

What is a NRL6 form?

If you are the UK letting agent or a tenant who does have deductible tax from any rental income of the property that the landlord based outside of the country, this form applies to you. You must give this form to your landlord as well as a copy of it, to HMRC. The form can be found here.

Do I need to complete a UK tax return if I am non-resident?

You do, unless you have a double-tax agreement with HMRC. You need to pay tax on your income if you are a registered UK citizen even if you live elsewhere for the majority of the year. The non-domicile status still requires you to pay tax on any foreign income.

How many days can you stay in UK without paying tax

As long as you remain a tax resident of the UK and spend no more than 182 days in the country, you won’t need to pay tax.

Letting agent obligations if you pay rent to a Non-Resident Landlord

You have no lower rent limit and can withhold tax on any rents you get from the non-resident landlord. You must then declare to HMRC, how much rent you have collected for the landlord. This is a safety precaution on behalf of the government. They want to know how much the landlord has earned in rent, from someone other than the landlord themselves. As you can imagine, it is sometimes easy to hide the true earnings of a property being let, and thus the non-resident landlord paying less tax on their income from the property, than is warranted.

Tax Accountant can help you with the non-resident landlord scheme and tax return

As you can probably see, the process is complex and there are many pitfalls with harsh penalties attached to them. If you get it wrong, you can be fined heavily and cases of fraud keep the government continually wary of loopholes and cloak and dagger shenanigans. A tax accountant knows the non-resident landlord scheme like the back of their hand. They will make sure you don’t pay a penny over and also, allow you to rent out the property to whomever you wish. Obviously, you will have an agreement with the tenant to pay the extra 20% for them. But if not, you might not enjoy the fruits of tax deductibles. So a tax accountant can show you beneficial agreements and how to fill out your tax return with all this in mind.

Get in touch

Please contact us if you have any further questions. We’re more than happy to help you and know how serious this topic is in light of recent political events.

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