Tax and the Non-Resident Landlord
All owners of property in the UK are required to pay tax on their letting income unless the income after allowable expenses is less than an individual’s personal allowances. However, special rules apply to the UK rental income of non-residential landlords (NRL) or landlords who live abroad (usually for more than a six month period).
The NRL (Non-Resident Landlord) scheme operates for rental income paid on or after 6 April 1996 and replaces the old rules under the Taxes Management Act 1970. If you rent your property through an agent they will deduct tax from your rental income (currently at a rate of 20%), unless written notification to the contrary is received from the Inland Revenue in the form of an Approval Certificate. An approval certificate will allow you to receive all rental income due without deductions to cover tax liabilities and you can apply for this by completing an NRL1 form which Wills & Smerdon can provide for you.
Alternatively, the forms are available from The Inland Revenue at the address overleaf, and you can apply for approval if:
- Your UK tax affairs are up-to-date
- You have never had any UK tax obligation or
- You do not expect to be liable to UK tax
If you do not have Inland Revenue Approval at the outset of the tenancy, Wills & Smerdon or your tenant will be required to withhold and pay the tax due on your behalf at Basic Rate Tax (20% at the time of printing). If you do not have approval, this tax deduction will continue if approval has not been received within 30 days of each quarter. Whilst your eventual liability for tax may be less than the amount forwarded to the Inland Revenue, Wills & Smerdon will not be liable for refunds and you will need to liaise with the Inspector of Taxes directly. All tax deducted and held pending quarterly assessment will not earn interest on your behalf.