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5.5.2. Rental income

Non-residents who receive rental income are subject to the Non Resident Landlord (NRL) scheme.  

The scheme requires UK letting agents to deduct basic rate tax from any rent they collect for NRLs, and effect is that the tenant or agent is required to deduct a 19% tax from all rental payments.  This tax is payable to HMRC and the net rental income paid to the landlord.  When landlords submit their tax returns, they report the full rental income (including the tax deducted by the tenant/agent). Their UK income tax liability is then reduced by the tax deducted by the tenant/agent.

The landlord can apply to HMRC to receive the rental income gross (without tax being deducted), but still remains liable to UK income tax on the gross rental income. HMRC is likely to accept the application if:

  • the landlord’s UK tax affairs are up to date;
  • the landlord has never had any UK tax obligations before making the application;
  • the landlord does not expect to be liable for UK income tax for the year of application; or
  • the landlord is not liable to pay UK tax because he or she is a Sovereign Immune (such as foreign Heads of State, government or government department representatives).