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. The scheme is set out in sections 971-972 of the Income Tax Act 2007, and HMRC publishes full guidance on GOV.UK.

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. 

Who Qualifies As a Non-Resident Landlord?

The British government will consider you as a non-resident landlord 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.

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. For example, if two joint non-resident owners receive £150 a week in rent between them, each owner’s share is £75 a week. The £100-a-week threshold that lets a tenant paying rent directly (without a letting agent) skip the deduction is applied per landlord, so neither share would need tax withheld, even though the combined rent is above £100. Letting agents, however, must always operate the scheme and deduct tax regardless of the weekly amount.

The 5-Year Non-Resident Rule:

If you were a UK resident for at least 4 of the 7 tax years before you left, and you become non-resident for 5 years or less, HMRC’s temporary non-residence rules can apply when you come back. Certain income and gains you received while overseas (most relevantly, capital gains from selling a UK property) can become taxable in the year you return. Staying non-resident for more than 5 years (5 years and a day) takes you outside these rules. Full conditions are set out in HMRC’s Statutory Residence Test guidance.

How the Non-Resident Landlord Scheme Works

Under NRLS, if a 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:

1. 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.

2. 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.

For example, if your letting agent collects £1,200 a month in rent and you don’t hold gross payment approval, they must withhold 20% (£240) each month, pay it across to HMRC by the relevant quarter deadline, and pass you the remaining £960. Once you have NRL1 approval, the full £1,200 is paid to you and you settle the tax yourself through self-assessment.

This isn’t a one-off calculation; it repeats every month. Each time your agent collects the rent, they hold back 20% before passing on the rest to you. Then add that amount to a running total for the quarter rather than sending it to HMRC straight away. Once the quarter ends, they pay over the accumulated total within the 30-day deadline, and the cycle starts again for the next three months. That’s why your monthly bank transfers are consistently 20% lighter than the rent your tenant actually pays, even though HMRC itself is only settled  four times a year.

How Letting Agents Handle NRLS Compliance

A compliant UK letting agent will register you with HMRC as soon as they start managing your property, deduct and pay the tax automatically each quarter. And they’ll give you a written statement of the rent collected and tax deducted for the year. Keep this safe, as you may need it for your own records or a Self Assessment return. If an agent can’t produce this on request, or hasn’t registered you for the scheme at all, treat it as a warning sign. Ask them to confirm their NRLS compliance in writing.

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 Income

To apply for the gross payment, landlords should register the appropriate application forms with the HMRC.

1. NRL1 for individuals
2. If you are a company, use NRL2.
3. For trusts where all trustees have their usual place of abode outside the UK, apply using NRL3.

Choosing between the two isn’t just about cash flow. If your UK tax position is straightforward and you’re comfortable filing an annual Self Assessment return, gross payment approval means you receive your full rental income and deal with the tax yourself once a year. But if your letting agent handled the tax as it’s collected, or your UK tax affairs are still being sorted out, staying on withholding, in this situation, is the simpler, lower-admin option while you get set up.

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

Documents Required For Self-Assessment Filing

If 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 Applicable
• Taxpayer information: Name, Date of Birth, or Address
• A Unique Taxpayer Reference (UTR)

From 6 April 2026, Making Tax Digital for Income Tax also starts affecting landlords. If your qualifying property income (before expenses) was over £50,000 on your 2024-25 tax return, you must keep digital records and send quarterly updates to HMRC using compatible software, instead of filing just once a year. This threshold drops to £30,000 from April 2027 and £20,000 from April 2028, so most landlords using a UK letting agent to manage several properties will eventually be brought into it. See HMRC’s guidance on Making Tax Digital for Income Tax for the full rollout timetable.

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

Scotland Rates

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. Separately, from 6 April 2027 the government is introducing new, separate tax rates for property income: a property basic rate of 22%, higher rate of 42%, and additional rate of 47%. HMRC has confirmed the standard NRLS withholding rate will also rise from 20% to 22% from the same date, so letting agents and tenants will need to deduct more from non-resident landlords’ rent once the change takes effect.

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:

What Is Not Considered Rental Income

These earnings receipts coming from land use are not treated as rental income under the NRLS:

Advantages of NRLS:

1. Your letting agent or tenant deducts and pays HMRC the tax for you, so you don’t need to register as an employer or run payroll.
2. Once you have gross payment approval, HMRC lets your letting agent pay you the full rent, so you settle the tax yourself at your usual Self Assessment deadline instead of losing 20% every month.
3. Double Taxation Agreements often let you offset UK tax already withheld under NRLS against tax owed in your home country, so the same income isn’t taxed twice.
4. Any tax over-withheld during the year can be reclaimed through your annual Self Assessment return.

Disadvantages of NRLS:

1. Without gross payment approval, 20% of your rent is deducted before it reaches you, which can affect your cash flow if you rely on that income.
2. Gross payment approval isn’t automatic. HMRC can take several weeks to process it, and can withdraw it if you miss a deadline.
3. From 6 April 2026, landlords with qualifying property income over £50,000 also need to keep digital records and file quarterly under Making Tax Digital, on top of NRLS reporting.
4. If you let directly to a tenant rather than through a UK agent, the tenant becomes responsible for withholding the tax. Most tenants aren’t familiar with this, so mistakes are common.

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.

FAQs on Non-Resident Landlord Scheme