Tax Guide For Overseas Landlords
Foreigners with rental properties in the UK or earning UK rental income are considered overseas or non-resident landlords. The same applies to landlords for the purposes of the Non-resident Landlords (NRL) scheme, which in this case include companies and trustees and not just individuals.
Those operating under a partnership are treated as separate landlords in respect of each of their rental income.
Property owners whose usual place of abode is outside the UK are also treated as non-resident landlords. The same thing is true for individuals that have been absent from the UK of 6 months or more. HMRC would normally regard such persons to have a usual place of abode outside the UK.
Other considerations for the usual place of abode include:
- A non-resident company with a UK branch that is within the charge to Corporation Tax
- Trustees that have a usual place of abode outside the UK
- A property jointly owned by a husband and wife, both of which have a usual place of abode outside the UK
Non-Resident Landlords Scheme
This refers to a tax scheme for persons with UK rental income whose usual place of abode is outside the UK. This applies to any rental income paid to non-residents landlord starting from 6 April 1996.
For an overseas landlord to qualify, he must be a non-resident and must meet the requirements with regard to the usual place of abode.
How tax is deducted depends on whether or not a letting agent is available.
- A letting agent is responsible for deducting tax from a non-resident landlord’s UK rental income and for paying taxes to HMRC’s Accounts Office, Shipley. Whether the amount of rent collected is £100 a week or less, letting agents must operate the scheme.
- Without a letting agent, the tenants will be responsible for deducting and paying taxes. However, this is only applicable to tenants with a rental fee of more than £100 per week. But there are instances when HMRC would make an exception for tennis with the rent of £100 a week or less.
- The tax year for the purposes of the NRL scheme runs from 1 April to 31 March of the following year.
- Letting agents and tenants operating the scheme must account tax for each three-month period ends on 30 June, 30 September, 31 December and 31 March.
- Letting agents and tenants are exempt from deducting tax if HMRC approves in writing an overseas landlord to receive full rental income. This only applies if:
- The UK tax affair of non-resident landlords is updated
- Overseas landlords never had any tax obligations in the UK
- They are not liable to UK tax for the year when the application is made
- When non-resident landlords complete their UK Self-Assessment Tax Return, their tax deductions from their UK rental income will be set off under the NRL scheme.
- In the event that an overseas landlord changes letting agents or tenants, he must inform Personal Tax International (PTI) about details of new letting agents or tenants. PTI will then send a notice to new agents and tenants, so they can start deducting tax.
The UK tax rules for non-resident landlords can be quite complex, which is why it is highly recommended that professional advice is sought. Whether from HMRC or independent tax companies, it is best for foreign landlords to get all the information necessary to operate legally and appropriately.