Non Resident Landlord Scheme

I emigrated to Australia last year, and began to rent my home in the UK. I decided to rent this property to a friend, and as such will not be engaging a letting agent. My friend will be paying the rent directly to me. Can you explain whether I will need to pay UK tax on this income?

1st March 2010

Even though you do not live in the UK, as the income arises here you will need to declare this to the UK tax authorities.

There are special rules for landlords who are classed as “Non Resident” for UK tax purposes. You must also seek advice from an accountant in Australia, as you may also be required to declare this income in the country you are currently resident.

Under UK legislation, If a tenant pays net rent of more than £100 a week (£5,200 per annum) to a non-resident landlord they must deduct basic rate tax (currently 20%) from the landlord’s rental income and pay this over to HM Revenue & Customs on behalf of the landlord. Tenants who pay net rent of £100 a week or less do not have to operate the scheme unless they are told to do so. When working out the amount to tax, the tenant can take off tax deductible expenses that are incurred by the landlord for the purposes of letting the property such as council tax, ground rent, repairs etc.

If your tax affairs are up to date or you do not expect to be liable to UK income tax for the tax year due to your personal allowance exceeding the income you receive, you can apply on form NRL1 to the Centre for Non Residents for approval to receive your rental income gross. You must still include this information on a UK self assessment tax return at the end of the tax year.

For further information on the landlords and tenants responsibility under HMRC’s Non Resident Landlord Scheme, contact your local TaxAssist Accountant.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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