The Non-resident Landlord Scheme: renting out UK property from abroad

If you rent out a UK property while living abroad, tax is normally taken out of your rent before it reaches you. A letting agent or tenant deducts basic rate tax, currently 20%, from the rental profits and pays it to HMRC each quarter. This is the Non-resident Landlord Scheme, and it applies because the profits from letting UK property are liable to UK tax even when the landlord is not UK resident¹.

The scheme does not change how much tax you ultimately owe. It changes who pays it and when. Tax is withheld at the basic rate whatever your overall income, so if you are due a refund, or you owe more than the basic rate, that is settled later through a Self Assessment tax return³. You can apply to HMRC to receive your rent with no tax deducted, using form NRL1, and HMRC will then tell your tenant or agent to pay you gross¹.

The rules differ depending on who collects the rent. A letting agent deducts from rental profits; a tenant who pays you less than £100 a week does not have to operate the scheme unless HMRC asks them to³. Understanding which situation applies to you decides what paperwork you need and how the tax is accounted for.

How the Non-resident Landlord Scheme works

The scheme exists because the UK taxes profits from UK property regardless of where the owner lives. If you have profits from letting property situated in the UK, you are liable to tax in the UK on those profits even if you are not UK resident, under the Non-resident Landlord Scheme². The mechanism is a deduction at source: basic rate tax is withheld from a landlord's rent before it is paid to them⁶.

Who does the withholding depends on how the rent is collected. Where a letting agent manages the property, the agent deducts tax from the rental profits at the basic rate, currently 20%, each quarter³. Where there is no agent and the tenant pays the landlord directly, the tenant takes on that role, unless the rent is below the £100 a week threshold or HMRC has said otherwise³.

The deduction is not a final tax. It is a payment on account of the landlord's UK tax liability, and the final figure is worked out on a Self Assessment tax return. That matters because the basic rate is applied to everyone in the scheme, whether their eventual liability is higher, lower or nil. A landlord whose income is below the Personal Allowance can still have tax withheld and then reclaim it.

Making Tax Digital rules remain the same for those in the scheme, and an adjustment may have to be made on the year-end tax return depending on the software used⁶. If you are within Making Tax Digital for Income Tax, the withheld tax still has to be reconciled, so the scheme and digital reporting run alongside each other rather than replacing one another.

Tax withheld at the basic rate of 20%, whatever the landlord owes

The rate applied under the scheme is the basic rate of Income Tax, currently 20% on non-savings, non-dividend income⁷. It is applied to the rental profits, not to the landlord's total income, and it is applied without regard to the landlord's Personal Allowance or tax band. That is the defining feature of the scheme: the deduction is a flat withholding, and the true liability is settled afterwards.

This creates two possible outcomes. If the landlord's eventual UK tax bill is lower than the tax withheld, the difference is reclaimed through a tax return. If it is higher, for example because the landlord has substantial UK income and pays at the higher rate, the extra is paid through the return. The scheme does not decide the bill; it only collects part of it early.

The 20% figure also appears elsewhere in landlord taxation, which can cause confusion. The tax relief landlords of residential properties get for finance costs is at the rate of 20%, and it is the same for residential landlords across the UK⁸. That relief is a separate matter from the scheme's withholding rate, but both use the basic rate as their reference point.

There is a change on the horizon for finance cost relief. From April 2027, finance cost relief will be provided at the separate property basic rate of 22% for unincorporated landlords⁹. That is a future rate for relief on finance costs, not a change to the 20% withheld under the Non-resident Landlord Scheme, and the two should not be conflated when planning.

Receiving rent without tax deducted: applying with form NRL1

An individual non-resident landlord who wants to receive UK rental income with no UK tax deducted uses form NRL1¹. The application asks HMRC to approve you to receive your rental profits gross, and in return HMRC will ask you to complete a Self Assessment tax return once a year³. Approval is not automatic on submission: HMRC will approve applications after an initial check, and applications will be checked later in more detail¹.

Once approved, HMRC sends a separate notice to any tenants or letting agents named on the application form, authorising them to pay rental income without deducting tax¹. That notice is what actually stops the deduction at the point of payment. Until the tenant or agent has it, they are expected to keep withholding. If you change agent or tenant, the new one needs to be brought within the approval.

Applying to be paid gross does not remove the obligation to report. It moves the whole liability to the annual return. For a landlord whose only UK income is rent and who expects to owe little or nothing, that is usually simpler than having tax withheld and reclaimed. For a landlord who expects to owe more than the basic rate, being paid gross means the full liability falls due through Self Assessment rather than partly being covered by quarterly deductions.

When a tenant has to run the scheme: the £100 a week threshold

Where a letting agent is not involved, the tenant becomes the person who deducts tax. There is a threshold: tenants who pay rent that is less than £100 a week do not have to do this unless HMRC asks them to³. Below that level, the tenant can pay the rent in full and the landlord accounts for the tax through Self Assessment.

The threshold is a weekly figure, and it applies to the rent the tenant pays, not to the landlord's profit. A tenant paying £100 a week or more is within the scheme and should deduct basic rate tax from the rent unless HMRC has authorised gross payment. A tenant paying less than £100 a week is outside it unless HMRC specifically requires them to operate it.

This is one of the practical reasons the NRL1 route matters for landlords with a single property let directly to a tenant. If the rent is above the threshold and no approval is in place, the tenant is expected to withhold, which means the landlord receives less each month and reclaims later. If approval is in place, the tenant receives the notice and pays in full.

Tenants who do have to operate the scheme are not making a judgement about the landlord's tax position. They are applying a flat deduction to the rent and passing it to HMRC. The landlord's expenses, allowances and reliefs are not the tenant's concern and are not taken into account at that stage.

What letting agents and tenants must do: quarterly payments, returns and certificates

Letting agents and tenants who deduct tax under the scheme have a set of administrative duties. They deduct at the basic rate from rental profits each quarter and account for the tax to HMRC³. At the end of the tax year they provide the landlord with a certificate of tax deducted, form NRL6, showing the rent and the tax withheld, which the landlord uses when completing a Self Assessment return.

The tax year for these purposes runs from 6 April one year to 5 April the next⁴. Quarterly accounting therefore falls within that year, and the certificate covers the same period. The landlord's return, which is where any overpaid tax is reclaimed, also covers the year to 5 April.

Record keeping matters on both sides. Landlords and self-employed people should keep records for at least five years and 10 months⁵. That period covers the tax year plus the window in which HMRC can enquire into a return. Agents and tenants who have deducted tax should keep their own records of deductions, payments and certificates so the figures can be checked against the landlord's return.

Where a landlord is not UK resident, there is a further reporting duty that sits outside the scheme. You must report all sales of UK property or land, residential and non-residential, if you are not a UK resident, even if you have no tax to pay¹¹. That is a Capital Gains Tax reporting obligation, separate from the rental scheme, but it is easy to overlook when the rental position is already being handled.

Claiming back withheld tax through a UK tax return

The route to recovering tax that has been over-withheld is a Self Assessment tax return. The withheld tax is shown on the return, along with the rental income and allowable expenses, and the final liability is calculated. If more has been deducted than is owed, the difference is repaid. If less has been deducted, the balance is payable.

The return is also where the landlord's personal position is taken into account. If you are eligible for a Personal Allowance you pay Income Tax on your income above that amount; otherwise, you pay tax on all your income¹⁰. That distinction matters for non-resident landlords, because eligibility for the Personal Allowance depends on residence status and, in some cases, nationality. The scheme's flat 20% deduction takes no account of it, which is precisely why the return is needed.

There are other reliefs that can reduce the eventual bill and are claimed through the return. If you have claimed tax relief under a double-taxation agreement, you do not need to report your income to HMRC¹⁰. That can remove the need to report altogether where the agreement covers the income, though the position depends on the terms of the particular agreement.

Two further points sit alongside the rental scheme. If you return to the UK within five years, you may have to pay tax on certain income or gains made while you were non-resident, not including wages or other employment income¹². And if you were not resident in the UK and paid a surcharge to purchase residential property in England or Northern Ireland but are now a UK resident for the purposes of Stamp Duty Land Tax, you may be able to claim a refund of the 2% surcharge for non-UK residents¹³. Both are separate from the Non-resident Landlord Scheme but commonly arise for the same people.

Where to get help

The scheme's rules are set out in HMRC guidance, and the application process runs through form NRL1¹. If you are unsure whether you are within the scheme, whether your tenant should be deducting, or how to complete a return, free and impartial help is available. TaxAid provides tax information for people on lower incomes, including guidance on property rentals and Self Assessment¹⁴. Which? publishes consumer guidance on tax on overseas property and on online tax returns³.

For the wider picture on how rental income is taxed, including jointly owned property, and on the mortgage interest restriction that affects landlords, the site's pages on rental income and the mortgage interest restriction set out the rules. If you are moving abroad or returning to the UK, residence and moving abroad explains how residence status is determined, and Self Assessment covers who must file a return and the deadlines.