Overseas Landlords Guide from Adams Estates
If you own a rental property in the UK but live abroad for more than six months, you are classified as an Overseas Landlord. This status requires compliance with the Non-Resident Landlords (NRL) scheme managed by HMRC, which governs tax payments on rental income.
1 Definition of 'Living' Abroad
- Non-Resident Landlord:An individual whose usual place of abode is outside the UK and who receives UK rental income.
- Temporary Absence: Individuals outside the UK for less than six months are not considered Non-Resident Landlords.
- Special Cases:Members of the HM armed forces and Crown Servants abroad for over six months are included as Non-Resident Landlords.
Tax Obligations Under the NRL Scheme
UK letting agents, including Adams Estates, must deduct basic rate tax (20%) from the net rental income received on behalf of Non-Resident Landlords and remit these payments to HMRC quarterly. This obligation ensures that tax liabilities are managed even while landlords reside outside the UK.
2 Jointly Owned Properties
For properties owned jointly:
- Each owner is individually liable for their share of tax.
- Income and expenditure are split equally.
- Each owner must fulfill their tax obligations separately.
Direct Rent Payments from Tenants
If a tenant pays rent directly to a Non-Resident Landlord:
- The tenant must deduct 20% tax from the net income and pay this to HMRC quarterly.
- Tenants paying less than £100 per week are exempt from withholding tax but must annually declare the rent paid to HMRC.
3 Applying for Gross Payment Approval
Non-Resident Landlords can apply to receive gross rental payments (without tax deductions) by submitting an NRL1 form to HMRC. This application allows letting agents to pay rent without deducting tax at source, which can improve cash flow for landlords.
- NRL1 Form Approval: Receiving approval does not exempt the rent from UK tax. Landlords must still report this income in their annual tax returns and pay the appropriate taxes.
- Joint Ownership: Each owner must complete a separate NRL1 form to apply for gross payment approval.
Summary
Adams Estates, as a UK letting agent, ensures compliance with the NRL scheme by deducting and remitting taxes for Non-Resident Landlords. For landlords, understanding these requirements and leveraging tools like the NRL1 form can help manage cash flow and tax obligations effectively while residing abroad.
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