UK residents and domiciled individuals are subject to UK income tax on their worldwide income. The income tax rates are set by the government annually and the current thresholds for individuals are as follows:-
Click here to view table.
Taxable income includes any earnings, pension income, bank interest, income from dividends and most notably, any rental income.
If you own property in the UK, but you are not resident here, and you receive a rental income, you will have to pay income tax on that rent that you receive, according to the above thresholds. If a non-UK company owns property in the UK then it must also pay tax on any rental income but at a flat rate of 20%. In both circumstances, your tenants (or any letting agent who you appoint) must comply with the HMRC Non-Resident Landlords (NRL) Scheme.
Under the NRL Scheme:-
- “Non-resident landlords” are persons who have UK rental income and whose “usual place of abode” is outside of the UK.
- “Landlords” also includes individuals, companies and trustees so the NRL Scheme will apply if you buy property in the UK as an individual or as part of a corporate structure.
- Individuals who are non-resident landlords will be absent from the UK for six or more months of the year.
- Companies who are non-resident landlords usually have their registered office outwith the UK. If you appoint a letting agent, the agent must deduct tax from the landlord’s UK rental income and pay the tax to HMRC. If there is no letting agent and if your tenants pay more than £100 a week, it is for your tenants to deduct the tax from the landlord’s UK rental income and pay the tax to HMRC.
However, as a non-UK resident landlord, you can apply to HMRC for approval to receive the rental income gross i.e. without any income tax having been deducted if:
- your UK tax affairs are up to date;
- you have never had any UK tax obligations;
- and you do not expect to be liable to UK tax for the year in which the application is made.