Self assessment for non-resident landlords

When am I treated as non-resident?

From 6th April 2013 there are automatic tests to determine whether or not you are resident in the UK: The automatic overseas test:

If: 1.You were resident in the UK in one or more of the previous three tax years and are present in the UK for fewer than 16 days in a tax year; 

or 2.You were not resident in the UK in each of the previous three years and you are present in the UK for fewer than 46 days in a tax year; 

or 3.You leave the UK to carry out full-time work abroad, provided you are present in the UK for fewer than 91 days in the tax year and fewer than 31 days are spent working for more than 3 hours in the UK in a tax year, You will automatically be not resident in the UK for that tax year.

The automatic UK test:

If: 1.You are present in the UK for 183 days or more in a tax year;

or 2.You have a home in the UK for a period of more than 90 days, are present in that home for at least 30 separate days during a tax year and there is a period of 91 consecutive days (some of which fall in that tax year) where you have no home overseas or if you have a home but have not been present in one home overseas for more than 30 days;

or 3.You carry out full time work (over 3 hours per day) for a period of 365 days or more with no significant break (at least 31 days) and more than 75% of the total number of those work days are in the UK, You will automatically be treated as resident in the UK.

If you do not meet either of the automatic tests then the following ties to the UK are taken into account: Family ties Accommodation Substantive employment/self-employment in the UK UK presence in previous year More time in UK than in other countries.

What is the effect of being non-resident?

Generally, you are only assessed to tax on income received in the UK. The main exception is that if you work for the Crown, the income is taxable in the UK wherever it is earned. There are double tax treaties with some countries which means that some income received from the UK may be taxed in your country of residence and may not be taxable in the UK. However, income from a property in the UK is usually taxed in the UK wherever you reside.

If you are a married couple with net rental income of less than £2,095 per month and you have no other UK income, then you should not be liable for income tax because the income would be covered by your personal allowance, provided that this was available. British and EU citizens are entitled to the personal allowance.

For other countries, you may be entitled to the UK personal allowance depending on the Double Tax Treaty. Tenants or agents have a responsibility to deduct basic rate tax from any rent paid to non-resident landlords. If you wish to continue receiving UK rental income gross whilst you are non-resident, you should submit Form NRL1 to the HMRC Centre for Non-Residents. HMRC should then grant approval for rents to be paid to you gross and notify the tenant or agent as appropriate. Your rental profits will still remain taxable in the UK but this will help with cash-flow.

From 6th April 2015, if you dispose of a residential property in the UK or after 5th April 2019, you are liable to tax on the Capital Gain. If you purchased the property prior to 5th April 2015/2019 then the gain assessable is only for the period from 5th April 2015/19 to the date of disposal. Private Residence Relief may be available if you have lived in the property at any time and the annual exemption is available to set off against the gain. If you owned the property on 5th April 2015/19, you can either:

1. Claim the market value of the property at 5th April 2015/19 against the proceeds of sale (the default position).The gain/loss is the difference between the sale proceeds (less costs) and the market value at 5th April 2015/19 (plus any enhancement expenditure after the relevant date). If the property was your principal private residence at any time prior to 5th April 2015 then you can claim the last 9 months. If the disposal was prior to 6th April 2020, you would also be able to claim lettings relief as well as long as the property was let and it was your principal private residence at some time. Lettings Relief is not available after 5th April 2020 unless the property was occupied by the tenant at the same time as the landlord was resident in the property.

2. Elect to time apportion the gain over the total period of ownership and then the amount chargeable would be the portion which relates to after 5th April 2015.

3. Elect for the retrospective basis to apply which means that the whole gain/loss is taken into account. You may want to do this if there is a loss or principal private residence relief gives a lower gain over the whole period.

The elections in 2 and 3 are irrevocable once made. If you are non-resident for less than five whole tax years any capital gains which you make on any other assets (which are not residential property sold after 5th April 2015, other properties after 5th April 2019 or assets used in a trade in the UK) whilst abroad may be taxed in the year you return unless those assets were acquired and disposed after you became non-resident. Apart from dwellings sold after 5th April 2015/other properties sold after 5th April 2019/assets used in a UK trade or you returning to the UK within 5 tax years, there is no Capital Gains Tax if you are a non-resident. 

YOU MUST MAKE A RETURN OF THE DISPOSAL OF THE ANY PROPERTIES AND PAY ANY CAPITAL GAINS TAX DUE WITHIN 60 DAYS OF THE COMPLETION OF THE SALE. The return has to be made whether you  complete a self assessment return or not. You should also confirm your tax reporting requirements in the country where you reside with a local tax adviser.