you’re a property owner living abroad who receives rental income from UK properties, understanding the Non-Resident Landlord Scheme (NRLS) is crucial for staying compliant with HMRC regulations. This comprehensive guide covers everything you need to know about the NRLS under current UK tax law for 2025.

What Is the Non-Resident Landlord Scheme?

The Non-Resident Landlord Scheme is HMRC’s mechanism for collecting UK income tax on rental income from landlords whose ‘usual place of abode’ is outside the United Kingdom. Introduced in 1996, the scheme ensures that UK tax is properly collected on UK-sourced rental income, even when the property owner lives overseas.

Under the NRLS, letting agents or tenants must typically deduct basic rate tax (currently 20%) from rental payments before passing them to non-resident landlords, unless the landlord has received approval from HMRC to receive rent without tax deducted.

Who Qualifies as a Non-Resident Landlord?

Definition of ‘Usual Place of Abode’

For HMRC’s purposes, you’re considered to have a ‘usual place of abode’ outside the UK if:

• Individuals: You’re absent from the UK for 6 months or more in a tax year
• Companies: Your main office or place of business is outside the UK, or you were incorporated outside the UK
• Trusts: All trustees have their usual place of abode outside the UK

Importantly, you can be UK tax resident but still fall under the NRLS if your usual place of abode is overseas. The scheme applies to various types of landlords, including:

• Individual property owners
• Companies
• Trusts and trustees
• Partnerships (each partner treated separately)
• Armed Forces personnel and Crown servants posted abroad

Joint Ownership Considerations

If you jointly own UK property with a spouse or civil partner, the NRLS applies to both if you both have your usual place of abode outside the UK. Each person must apply separately for any exemptions, and HMRC will only authorise payments without tax deduction to the named individual on the approval notice.

How Does the NRLS Work?

Tax Deduction Requirements

The NRLS operates on a quarterly basis, with tax years running from 1 April to 31 March. The key obligations are:

For Letting Agents:

• Must deduct 20% tax from all rental income regardless of amount
• Required to operate the scheme for all non-resident landlords
• Must register with HMRC using form NRL4i within 30 days of tenancy start

For Tenants:

• Must deduct tax if paying more than £100 per week in rent directly to a non-resident landlord
• No obligation for rent of £100 or less per week unless specifically directed by HMRC
• Must register with HMRC within 30 days

Quarterly Reporting and Payment

Both agents and qualifying tenants must:

• Calculate and pay tax within 30 days of each quarter end (30 June, 30 September, 31 December, 31 March)
• Submit quarterly returns using form NRLQ
• Complete annual returns by 5 July following the tax year end
• Provide landlords with certificates of tax deducted (form NRL6)

Current Tax Rates for 2025-26

Understanding the current UK tax landscape is essential for non-resident landlords:

Income Tax Rates (England, Wales, Northern Ireland)

• Personal Allowance: £12,570 (no tax)
• Basic Rate: 20% on income between £12,571 and £50,270
• Higher Rate: 40% on income between £50,271 and £125,140
• Additional Rate: 45% on income over £125,140

Scottish Tax Rates

Scotland has its own income tax rates with six bands:

• Personal Allowance: £12,570
• Starter Rate: 19% (£12,571-£15,397)
• Basic Rate: 20% (£15,398-£26,561)
• Intermediate Rate: 21% (£26,562-£43,662)
• Higher Rate: 42% (£43,663-£75,000)
• Advanced Rate: 45% (£75,001-£125,140)
• Top Rate: 48% (over £125,141)

Applying for Gross Payment Approval

Non-resident landlords can apply to receive their rental income without tax deduction if they meet certain criteria.

Eligibility Requirements

HMRC will grant approval if:

• Your UK tax affairs are up to date
• You’ve never had UK tax obligations, or
• You don’t expect to be liable for UK tax in the application year

Application Process

Submit the appropriate form based on your status:

• Form NRL1: Individuals
• Form NRL2: Companies
• Form NRL3: Trusts and estates

Important timing: If you’re leaving the UK, apply no more than 3 months before departure. If already overseas, you can apply immediately.

Benefits of Gross Payment

Receiving gross payment provides significant cash flow advantages, as you’ll receive the full rental amount and handle tax obligations through your annual Self Assessment return rather than having tax deducted at source.

Allowable Expenses and Deductions

When calculating tax due, agents and tenants can deduct expenses they can be ‘reasonably satisfied’ are allowable. HMRC doesn’t expect non-tax experts to be perfect, providing protection when expenses are genuinely believed to be allowable.

Common Allowable Expenses

• Letting agent fees
• Property insurance
• Maintenance and repairs (not improvements)
• Cleaning and gardening
• Accountancy fees for rental business
• Council Tax during vacant periods
• Legal and professional fees
• Advertising for tenants

Capital vs Revenue Expenses

Only revenue expenses are deductible. Capital expenses (property purchase, major improvements, alterations) cannot be deducted under the NRLS.

Self Assessment Obligations

Even with the NRLS operating, non-resident landlords typically must complete annual UK tax returns.

Filing Requirements

Non-resident landlords must file:

• Individuals: SA100 return plus SA105 (property) and SA109 (non-resident) pages
• Companies: Corporation Tax return (since April 2020, companies pay corporation tax on UK rental income)

Key Deadlines

• Self Assessment deadline: 31 January following the tax year end
• Notification of chargeability: 5 October if no return issued
• Corporation Tax returns: 12 months after accounting period end

Recent Changes and Updates for 2025

Corporation Tax Changes

Since 6 April 2020, non-resident landlord companies must pay corporation tax (19-25%) rather than income tax on UK rental income, aligning with UK resident company treatment.

Tax Rate Stability

Income tax rates and thresholds remain frozen until the 2028-29 tax year, meaning the personal allowance stays at £12,570 and basic rate threshold at £50,270.

Common Compliance Pitfalls

Avoid these frequent mistakes:

1. Assuming gross payment applies automatically – You must apply and receive approval
2. Mixing up responsibilities – Understand whether agent or tenant should operate the scheme
3. Poor record keeping – Maintain detailed records for four years
4. Missing quarterly deadlines – Late payments incur penalties
5. Ignoring currency implications – Consider exchange rate impacts on tax calculations

Practical Compliance Tips

For Non-Resident Landlords

• Apply for gross payment approval early if eligible
• Engage a UK tax adviser familiar with non-resident obligations
• Keep detailed records of all rental income and expenses
• Understand your wider UK tax position beyond just property income
• Consider timing of property sales given UK capital gains tax implications

For Agents and Tenants

• Establish landlord residence status early in the relationship
• Register with HMRC promptly when required
• Maintain robust record-keeping systems
• Don’t rely solely on landlord assurances about residence status
• Contact HMRC when uncertain about obligations

Impact of Double Taxation Treaties

If you’re resident in a country with a double taxation treaty with the UK, you may be able to claim relief for tax paid in both jurisdictions. However, this doesn’t eliminate your UK tax obligations on UK rental income.

Looking Ahead: Future Considerations

With tax thresholds frozen until 2028 and ongoing fiscal pressures, non-resident landlords should expect:

• Continued scrutiny of compliance
• Potential future changes to tax rates or rules
• Increasing digitalisation of tax reporting
• Enhanced international information sharing

Conclusion

The Non-Resident Landlord Scheme remains a crucial part of UK tax compliance for overseas property investors. With proper understanding and planning, you can navigate these requirements efficiently while optimising your tax position.

Whether you’re a new non-resident landlord or reviewing your existing arrangements, staying current with HMRC requirements and seeking professional advice ensures compliance whilst potentially reducing your overall tax burden.

For the most current information and to access official forms, visit HMRC’s Non-Resident Landlord guidance or consult with a qualified UK tax adviser specialising in non-resident taxation.

This guide reflects HMRC regulations as of July 2025. Tax rules can change, so always verify current requirements with HMRC or a qualified tax professional.