A landlord who lives abroad for more than six months of the tax year is considered to be a non-resident landlord by HMRC.
This means that different rules apply when it comes to taxation. Here is a quick overview of your tax obligations as a non-resident landlord.
Non-resident landlord companies
If your company is not based in the UK but owns properties in this country which it rents out, it is classed as a non-resident landlord.
Since 6 April 2020, non-UK resident landlord companies that have UK property income have been charged Corporation Tax.
This means that you must register for Corporation Tax and file Corporation Tax returns with HMRC.
The current Corporation Tax rates for company profits are:
Any non-resident company running a UK property business or receiving UK property income, is liable for Corporation Tax on its rental profits. Any gains arising on the disposal of UK property are also subject to Corporation Tax.
Additionally, if the property is suitable for residential use but is not let out on commercial terms, you may also have to pay Annual Tax on Enveloped Dwellings (ATED).
Non-resident landlord individuals
The scheme for individual non-resident landlords is that a return must be submitted, and tax accounted for, to HMRC on a quarterly basis, payment being due 30 days after the end of each quarter.
Where there is a letting agent, the amount subject to tax is the rent less expenses for that quarter, with possible adjustments when expenses have exceeded rent in any quarter.
If there is no letting agent, the tenant should deduct tax at the basic rate from the gross rent and remit this to HMRC, unless annual rent is less than £5,200, in which case rent may be paid over gross.
It is, however, possible to apply to HMRC for exemption from the scheme, so that the landlord can receive the gross rent.
For an application to be accepted, it must be shown either that all UK tax obligations have been met (or that there have been no UK tax obligations) before making the application, or that it is not expected that there will be any UK tax liability for the year in which the application is made.
Landlords may still be entitled to UK personal allowances (which can be used against letting income) despite being non-resident. The main categories of those entitled are British and European Economic Area citizens.
An annual claim form will normally have to be submitted to HMRC.
For non-resident landlords, the default is that tax must be deducted from the rent before it is paid to the landlord by either the letting agent or the tenant. This tax must be paid to HMRC within 30 days of each quarter end and a report sent to HMRC by 5 July following the end of the tax year.
To get your UK rental income paid gross, without deduction of UK tax, you can apply using the NRL1 form.
Property disposal and Capital Gains Tax (CGT) for non-resident landlords
If you are not resident in the UK and you dispose of UK residential property, you must report the disposal to HMRC within 30 days of the conveyance of the property.
This also applies to gifts (other than to a spouse or civil partner), in which case the disposal is deemed to have been made at its current open market value.
This additional reporting requirement is still required even if you are registered to submit a tax return.
Since April 2015, non-residents have been required to pay CGT on the sale of UK residential property, and this was extended to the sale of all UK property from April 2019.
The rules are complex, but generally there are three ways for a non-resident to calculate the gain or loss from the sale of UK property:
If you purchased the property after the relevant rule change date, only the normal calculation method is available.
However, you may be entitled to the UK annual CGT exemption (£3,000 for 2024/25) to offset against any gain made.
Our property taxation services
Due to the complex requirements of the HMRC scheme for non-resident landlords, it is essential to seek expert legal advice.
We have considerable experience with clients in the property industry and have links with a number of property management agents.
Our understanding of the agent’s responsibilities, particularly with regard to taxation, enables us to liaise closely with them to provide the maximum benefit to their clients.
Through providing taxation services to landlords, we have developed our services for both UK-resident and overseas individuals, and act for landlords from many different countries who let residential property in the UK.
We’ll help you prepare additional forms, submit claims for UK allowances, and liaise with your managing agent to avoid or minimise retention of tax from your net income.
You can trust us to advise you on the payment of liabilities and help you take advantage of any tax-saving opportunities.
Contact our property team today for expert tax advice.
