Non-Resident Landlord Scheme (NRLS): Understanding Tax Obligations

If you're a landlord renting out property in the UK while living abroad, you may (or will most likely) be subject to the Non-Resident Landlord Scheme (NRLS). This system ensures that landlords meet their UK rental income tax obligations, even when they aren't physically in the country. Whether you're a tenant, a non-resident landlord, or a letting agent managing a property for a non-resident landlord, understanding the NRLS is essential. 

Table of Contents

• What is the NRLS? 

• Who is Considered a Non-Resident Landlord? 

• Landlord Responsibilities 

• Tenant and Letting Agent Responsibilities 

• Special Considerations for Letting Agents 

• Applying for the NRLS 

• Double Taxation Relief for Overseas Landlords

• Conclusion: Stay Compliant with the Non-Resident Landlord Scheme UK

What is the NRLS?

The NRLS applies to individuals who live outside the UK for most of the year and earn rental income from UK properties. This scheme allows the UK government to collect tax before tenants or letting agents pay rent to the overseas landlord. Depending on the situation, either the tenant or the letting agent deducts the tax at the source. They then send the tax directly to HMRC to ensure the landlord meets their tax obligations.

👉 Official NRLS guidance from HMRC

Who is Considered a Non-Resident Landlord?

A non-resident landlord, for the purpose of the NRLS, is someone whose "usual place of abode" is outside the UK. Although this term isn't strictly defined in law, HMRC typically considers anyone who has lived outside the UK for more than six months to be non-resident. Being a non-resident landlord under the NRLS doesn’t always mean you're a non-resident for wider UK tax purposes.

If you're unsure whether NRLS applies to your situation, check out our guide on non-domicile tax status or UK tax rules for non-residents.

Landlord Responsibilities

Non-resident landlords can choose to register for the NRLS. This allows them to receive rental income gross, without tax deductions. To qualify, they must keep their tax affairs up to date and not expect to owe UK tax during the year of application. If HMRC approves the application, the landlord receives full rental income. However, they still need to report their earnings through a self-assessment tax return and pay any tax owed.

Non-resident landlords must file a UK self-assessment tax return to report their income, even if no tax is due. Rental income is still taxable in the UK, but they can deduct any NRLS tax already paid.

Tenant and Letting Agent Responsibilities

Tenants and letting agents have a role under the NRLS. If you're a tenant paying rent directly to a non-resident landlord and the amount exceeds £100 per week, you must withhold tax at the basic rate (currently 20%) before paying the rent. The same obligation applies if you're a letting agent. If the property is jointly owned, the rent paid should be considered separately for each landlord. For example, if there are two landlords, each has a threshold of £100 per week, giving an overall limit of £200 per week in total. 

However, if the landlord has registered to receive their income gross, you are not required to deduct tax. HMRC may also directly inform you if you’re exempt from withholding tax, or if the landlord’s tax situation is such that you don't need to take any action. 

In cases where they deduct tax, tenants or letting agents must send quarterly tax payments to HMRC and file annual returns to comply with the NRLS.

Special Considerations for Letting Agents

If you manage property for a non-resident landlord, the NRLS may classify you as a letting agent. This applies if you control rental income, even if you don’t own the property. As a letting agent, you must pay tax quarterly, submit returns, and give certificates to the landlord as required.

Letting agents must also note that even if a landlord applies to receive rent gross (without tax deduction), the agent still needs to submit an annual return.

Applying for the NRLS

Non-resident landlords who wish to receive rental income gross (without tax withheld) can apply through HMRC using form NRL1. If a property is jointly owned, each landlord must apply individually for their share of the income. 

When landlords receive rental income gross, they take responsibility for paying any tax owed directly to HMRC, instead of relying on the tenant or letting agent to deduct it at source. However, they must remember that this approach doesn’t exempt the income from UK tax — it only changes how the tax is paid.

Double Taxation Relief for Overseas Landlords

Landlords residing outside the UK should also check their tax obligations in their country of residence. In some cases, they may be subject to tax in both the UK and their home country. If this is the case, the landlord may be able to claim relief for double taxation, depending on the specific laws and treaties between the UK and their country of residence. 

To understand your options, check local tax laws or get in touch with a UK tax advisor.

🎥 Watch our international tax planning webinar for practical tips on managing cross-border tax matters.

Conclusion: Stay Compliant with the Non-Resident Landlord Scheme UK

The Non-Resident Landlord Scheme UK is designed to ensure tax compliance for overseas landlords, and it places legal duties on both letting agents and tenants to withhold tax where necessary.

Registering for gross payments can ease cash flow, but the onus is on landlords to file tax returns and settle any liabilities. Whether you're a landlord, tenant, or letting agent, staying informed about the NRLS is key to running a compliant property business.

At ASWATAX, we help non-resident landlords with compliance, reporting, and international tax planning, so you can focus on your investments with peace of mind.

Meet Omar Omar is a Chartered Tax Advisor (a.k.a an expert on tax issues) and founder of ASWATAX. He regularly shares his knowledge and best advice here in his blog and on other channels such as LinkedIn. Book a call today to learn more about what Omar and ASWATAX can do for you.

*Disclaimer: ASWATAX is a firm of Chartered Tax Advisors, and we strive to provide accurate, up-to-date tax insights. Tax laws may change, so this content is for general guidance only and not a substitute for professional advice. Seek independent tax and legal counsel before making decisions. ASWATAX is not liable for any loss from reliance on this information. Use at your own risk.