UK Non-Resident Landlord Scheme: Tax Rates, Forms & HMRC Rules
If you own UK property but live abroad, HMRC requires you to comply with the Non-Resident Landlord Scheme (NRLS). This means your letting agent or tenant is obliged to deduct 20% tax from your rent before paying you. However, you can avoid this deduction by registering the NRL1 form with HMRC and completing a self-assessment tax return to receive your full rental income gross.
In this guide, Real Estate Agents London explains how the Non-Resident Landlord Scheme works, who it applies to, and how to qualify for gross payment
What Is The Non-Resident Landlord Scheme?
The NRLS is a tax regulation scheme introduced by the HM Revenue and Customs (HMRC) in 1996. It is designed to collect tax on rental income earned by landlords whose “usual place of abode” is outside the United Kingdom. It covers all rental income earned from UK properties, including residential, commercial, and furnished lettings.
In other words, HMRC collects tax on UK-sourced rental income even if you live abroad. This scheme serves as a mechanism to regulate rental income taxation.
| How much tax does a non-resident landlord pay?Currently, Rental income is taxed at the basic rate of 20% before it reaches the landlord, unless they receive approval from HMRC to get the rent without tax deduction. |
Who Qualifies As a Non-Resident Landlord?
The British government will consider you as Non-Resident Landlords if you meet the following general criteria:
Six-month rule or Usual place of abode:
If your main residence is located outside the United Kingdom and you spend more than half of the tax year there. Then, you will be considered a non-resident landlord and required to pay the basic tax rate to HMRC.
| How HMRC Defines Usual Place Of Abode Individuals: You spend more than 6 months outside the UK every tax year, even when you are a British resident. Trusts: All trustees must have their usual place of abode outside the UK. If even one trustee resides in the UK, then the trust doesn’t fall under this scheme. Companies: Main office or place of business that are not in the UK, or were incorporated outside the UK, are classified as Usual place of Abode under the NRLS. |
Rental Income:
Living abroad but earning rental income from UK properties is the 2nd general factor to determine whether you will pay income tax.
Joint Ownership:
If a property is jointly owned, each owner is treated as a separate landlord. Then, the NRLS applies to each partner.
How the Non-Resident Landlord Scheme Works
Under NRLS, if tax is applicable, then the landlord’s representatives (letting agents or tenants) are responsible for deducting the tax from the rental income and paying it to HMRC. There are two options for carrying out this, depending on whether landlords have gross payment approval:
Withholding Tax:
If there’s no approval for the gross payment, tax must be deducted before it reaches the landlord. This responsibility is divided between representatives:
- Letting agents managing property on behalf of the owner must deduct 20% from all rental income they collect before paying the amount to the landlords. Then, pay it to the HMRC within 30 days of the end of each quarter.
- In the absence of agents, tenants paying rent of more than £100 per week directly to landlords are required to comply with 20% tax deduction and pay it to HMRC.
After paying the deducted tax, agents and tenants must complete an annual return to confirm payments made to HMRC. In addition, they must also provide the landlord with a certificate of tax deduction showing how much was withheld.
| The NRLS year runs from 1 April to 31 March, with quarterly deadlines on 30 June, 30 September, 31 December, and 31 March. |
Gross Payment Status:
Landlords who prefer to receive their full rental income without any deduction can apply to HMRC for gross payment approval. Once approved, no tax will be deducted. They instead report and pay tax through an annual self-assessment tax return.
HMRC will approve if any of the following apply:
- Your UK tax affairs are fully up to date
- You have never had any UK tax obligations
- You do not expect to be liable for UK tax in the year you are applying
- You are not liable to pay UK tax because you have Sovereign Immunity from UK taxation
| NRLS Forms Registration For Gross Rental IncomeTo apply for the gross payment, landlords should register the appropriate application forms with the HMRC.NRL1 for individuals If you are a company, use NRL2.For trusts where all trustees have their usual place of abode outside the UK, apply using NRL3. |
Self-Assessment Tax Returns For Non-Resident Landlords
If you pay income tax on UK rental income as an individual or trustee, you must complete a Self-Assessment tax return.
- File your return and pay any tax due by 31 January following the end of the tax year.
- If HMRC does not send you a notice to file, notify them of your tax liability by 5 October following the tax year end.
You may also need to make two advance payments towards the following year’s tax bill:
- Each payment equals 50% of your previous year’s tax liability
- The first payment is due by 31 January during the tax year
- The second payment is due by 31 July following the tax year end
| Self Assessment Filing RequirementsNon-resident landlords must complete the following forms as part of their Self-Assessment tax return:SA100: Main Self-Assessment tax returnSA105: UK property income pagesSA109: Non-resident and remittance pages Documents Required For Self-Assessment FilingIf you are completing a self-assessment tax return, you basically need to provide:Rental income or expenses: This includes bank statements or statements from letting agent management.Details of Joint Ownership, If ApplicableTaxpayer information: Name, Date of Birth, or AddressA Unique Taxpayer Reference (UTR) |
Corporation Tax For Non-UK Resident Companies
Non-UK resident companies that earn rental income from UK properties are subject to corporation tax, not income tax. The current corporation tax rate is between 19% and 25%.
- File a Company Tax Return within 12 months of the end of the accounting period
- Notify HMRC of chargeability within 3 months of the start of the first accounting period in which tax is owed
Current UK Tax Rates For Non-Resident Landlords 2025-26
The tax rate you pay depends on your total rental income and where your UK property is located.
England, Wales & Northern Ireland Income Tax Rates
| Band | Income | Rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Scotland Rates
| Band | Income | Rate |
| Personal Allowance | Up to £12,570 | 0% |
| Starter Rate | £12,571 – £15,397 | 19% |
| Basic Rate | £15,398 – £26,561 | 20% |
| Intermediate Rate | £26,562 – £43,662 | 21% |
| Higher Rate | £43,663 – £75,000 | 42% |
| Advanced Rate | £75,001 – £125,140 | 45% |
| Top Rate | Over £125,141 | 48% |
2026 Update: Income tax rates and thresholds remain frozen until the 2028-29 tax year. This means personal allowance stays at £12,570 and basic rate threshold at £50,270.
Rental Income Covered Under The Non-Resident Landlord Scheme
All the income receipts from the use of UK property or land will be covered under the NRLS scheme if the landlord is non-resident. Rental income from UK property includes:
| Rental Income Type | Example |
| Letting property | Furnished, unfurnished, commercial, domestic premises, land |
| Furniture payments | Separate payments from tenants for the use of furniture |
| Ground-related income | Rent charges, ground rents, feu duties |
| Lease premiums | Lump sums on granting certain leases |
| Sporting rights | Income from Fishing or shooting permits |
| Land use for waste | Allowing waste to be buried or stored |
| Land use fees | Film crew paying to use the house or land |
| Grants | Local authority or others for allowable expenses (e.g., repairs) |
| Investment scheme income | Rental income through enterprise investment schemes |
| Caravans or houseboats | If these are not moved around locations |
| Insurance recoveries | Cover for non-payment of rent |
| Service charges | Charges for services linked to tenant occupation |
What Is Not Considered Rental Income
These earnings receipts coming from land use are not treated as rental income under the Non-resident landlord scheme:
| Not Rental Income | Example |
| Commercial woodlands | Income from managed woodlands on a commercial basis |
| Mines & quarries | Including Gravel pits, sandpits, brick fields |
| Industrial works | Ironworks, gasworks, salt works, alum works, water works |
| Water-related assets | Streams of water |
| Transport or land structures | Canals, docks, inland navigation, drains, or levels |
| Rights & tolls | Markets, fairs, bridges, ferries, tolls |
| Railways & similar ways | Income from railways or other ways |
| Tied premises | Letting the premises used by traders |
| Trading activity | Running a hotel, etc. |
Advantages and Disadvantages of NRLS
| Advantages | Disadvantages |
| Ensures proper tax compliance for non-resident landlords | 20% deducted upfront can affect cash flow |
| A tax agent can reduce administrative work | UK tax rules can be complex to understand |
| Tax treaties may prevent double taxation | Record keeping can be time-consuming |
Conclusion
The Non-Resident Landlord Scheme ensures overseas landlords pay the correct tax on their UK rental income. It was introduced in 1996 and applies to individuals, companies, trustees, and partnerships. It operates quarterly, running from 1 April to 31 March each year. Tax must be paid to HMRC within 30 days of each quarter’s end.
Need help managing your UK property from abroad? We offer Property Management and Letting services, especially to help overseas landlords meet tax or rental compliance requirements.
FAQs for Non-Resident Landlord Scheme
If you are living abroad for more than six years, specifically in the tax year, then you will be considered an NRL with a usual place of residence outside the UK. But, you automatically become a UK resident if you spend 183 days or more in a tax year.
If landlords already have a usual place of residence outside the UK, then they can apply immediately and get their rental income without any tax deduction implementation. However, you should apply for the approvals if you are planning to live overseas for no more than 3 months.
HMRC will not approve an application if you provide incorrect information or fail to provide the required information to them. Plus, they feel that you will not be able to complete your tax obligations in the future.
HMRC will send a written notice to landlords mentioning the reason for disapproval and the date from which it is effective. Additionally, they will inform landlord representatives with proper notice that they should deduct 20% from the rental income. Or if you want to appeal against the withdrawal, you can in writing within 90 days of notice.
This is an economic tax agreement between two nations designed to prevent the same income from being taxed twice. DTA can simplify the double taxation by defining clear rules on which country will receive tax and under what conditions.
This scheme requires landlords to register themselves and their rental properties with local housing authorities or councils to prove that they meet health and safety standards. The main purpose of these schemes is to make sure that landlords meet the legal standards of renting out, improve the overall rental experience of individuals, and protect tenants.
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