Non-resident landlords

If you live or work overseas while owning and letting property in Britain, we can help you cope with the complexities of filing a UK tax return.

Simon Thandi, UK Landlord Tax

Hi, my name is Simon.

I am one of the Directors of UK Landlord Tax and a property owner myself. We’ve been dealing with non-resident landlords for years, helping them navigate British tax law from afar. Owning property in the UK can be hugely rewarding, with the right support.

 

Owning property in the UK needn’t be a headache

What if you could have …

Less hassle

No more posting off paper tax returns. No more worrying about whether you’ve understood UK tax law. One point of contact – someone who’s on your side and really understands property tax.

Fewer worries about HMRC

We’ll not only handle your UK tax return but also deal with any conversations with HMRC and follow-up questions. If the UK tax authority should launch an investigation, we’ll be on hand to represent your interests and make the process as painless as possible.

More money in your bank

Through strategic planning and an in-depth knowledge of the UK tax system, we’ll make sure you’re claiming every relief and allowance to which you’re entitled, preventing your tax bill from getting out of control.

Frequently asked questions

Do I need to file a tax return?

If you live outside of the UK and receive rental income then you will be required to file a tax return. If the property is jointly owned then each owner will need to file a tax return.

This is the case even if there is no tax to pay.

If you have not yet registered with HMRC for self-assessment you can do so by completing form NRL1i. This will not only register you but HMRC will also notify your letting agent, if you have one, or your tenant, that you are registered with them. Otherwise if the letting agent/tenant is applying the rules correctly, they will deduct 20% of the rent paid and send this to HMRC. You will then need to file a tax return to get this deduction back. Registering under the Non-residents Landlord scheme does not exempt you from Income Tax it merely means that the letting agent/tenant does not have to deduct tax.

Can I claim for the cost of travel to the UK?

Travel to the UK from abroad is an allowable cost so long as the travel was “wholly and exclusively” for the purpose of the letting business.

The main exception to this is if you have appointed a letting agent to manage the property for you. HMRC maintain that if you have a letting agent that manages the property, it is the letting agents place of business from where the property is managed. As such only the travel from the letting agent’s offices to the rental property is allowable.

If you manage the property yourself you may be able to claim the cost of travelling to the UK to deal with managing or dealing with other aspects of letting the property. If there is any private element to your visit and there is a “duality of purpose” the cost will not be allowed for tax purposes.

Example 1

You come to the UK for 2 weeks. You handle a changeover of tenants but you also visit friends and family and go to a few tourist locations. In this case the whole of the travel cost would be disallowed under duality of purpose rules.

Example 2

You come to the UK for 2 days. During that time you handle the changeover of new tenants, and deal solely with other letting related matters. You stay in a hotel and go out for a meal as part of your stay. You then return to your country of residence. In this case provided you have kept receipts and evidence of your stay (airline tickets, etc) you can claim for the travel, accommodation and meals would be allowable.

Do I have to pay tax on my UK rental income?

Rental income arising in the UK is subject to UK tax. Depending on your nationality and where you live you may be able to claim the UK personal tax allowance to set off against your rental income. You may also have to pay tax on your UK rental income in your country of residence. We therefore advise that you check this with a suitable qualified adviser in your country of residence.

So that you do not get taxed twice on the same income, the UK has double tax treaties with many countries to allow for tax relief from double taxation.

What is the Non Resident Landlord Scheme?

The Non-Resident Landlord Scheme is a scheme for taxing the UK rental income of persons whose “usual place of abode” is outside of the UK.

As a non-resident landlord you are required to register with HMRC under the Non Resident Landlord Scheme. This can now be done online by completing form NRL1i. HMRC will then process your registration and issue your self-assessment unique tax reference (UTR) to enable you to file tax returns. HMRC will also notify your letting agent, if you have one, or your tenant that you are registered.

If you are not registered, your letting agent or tenant is required to deduct 20% of the rent received and pay this over to HMRC. The deduction can then only be refunded once you file your tax return. Registering under the Non-residents Landlord scheme does not exempt you from Income Tax it merely means that the letting agent/tenant does not have to deduct tax.

Do I pay inheritance tax charged on my estate if I am non-resident?

As a non-resident you are subject to UK IHT on your whole estate if you are UK domiciled and your estate is valued at over £325,000.

If you have a non-domicile status in the UK, only your UK based assets will be liable to inheritance tax in the UK.

Can I hold property in a non-resident limited company?

Yes. For the 2020/21 tax year and onwards, Non-resident landlord companies must report their UK income by way of a CT600 return under the corporation tax system. 

Please see our detailed guide.

What is the difference between residency and domicile?

Residency is the place where you are living on a day to day basis and is considered each year. For UK Tax purposes, your residency is determined by the Statutory Residence Test.

Domicile is an intention to live in a place indefinitely rather than living in a country for a temporary purpose.

For more detailed guidance please see the following guide.

Do I get a tax free allowance against my rental income?

The UK personal tax allowance is currently £12,500. (2020-21)

If you are a British national it does not matter where you live as you are automatically entitled to this tax allowance against any UK income.

If you are a national of a country in the European Economic Area (EEA) you may be able to get the same tax allowances and reliefs as a UK resident. The EEA is:-

Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein. Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, UK.

In addition to the above you would also be entitled to the personal allowance if you are

  • a national of Israel or Jamaica.

Or

  • If you are a national AND also a resident of,

Argentina, Australia, Azebaijan, Bangladesh, Belarus, Bolivia, Bosnia and Herzegovina*, Botswana, Canada, Cote d’Ivoire, Croatia*, Egypt, Gambia, India, Indonesia, Japan, Jordan, Kazakhstan, Korea, Lesotho, Malaysia, Malta, Montenegro*, Morocco, New Zealand, Nigeria, Oman, Pakistan, Papua New Guinea, Philippines, Romania, Russian Federation, Serbia,*, South Africa, Sri Lanka, Sudan, Switzerland, Taiwan, Tajikistan, Thailand, Trinidad & Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, Uzbekistan, Venezuela, Vietnam.

(*Entitlement continues under the Double taxation Treaty the UK had with the former Yuogoslavia until such time as a new agreement takes effect.)

Do I have to pay capital gains tax when I sell my UK property?

Non-residents did not pay any Capital Gains Tax before 5th April 2015.

All non-residents are required to pay Capital Gains Tax on any chargeable gains on residential property from 6th April 2015 and on commercial property from 6th April 2019.

If the relevant property was owned on 5th April 2015 (for residential property) or 5th April 2019 (for commercial property) then the market value at the relevant date can be substituted for original cost.

For example,

Shane purchased an investment flat in Kensington in 2000 for £500k. Shane left the UK on 5th April 2015 and at that time the flat was valued at £1.5m. Shane now decides to sell the flat and is given a current value of £2m. Ordinarily, Shane would have a gain of £1.5m (£2m less £500k.) He could now opt to have the value as at 5th April 2015 as his base cost. His gain would therefore be £2m less £1.5m. The gain is reduced by £1m.

The gain must be reported online to HMRC within 30 days of the completion of sale. Any capital gains tax must also be paid within 30 days.

Do I have to pay the higher rate of SDLT on a property purchase if I live outside of the UK?

If you own another property, whether it is in the UK or not, you will be liable to pay the 3% higher rate SDLT when purchasing a property in the UK.

What do I need to file if I am selling a UK property?

As of 6th April 2020 you are now required to file an online disclosure and pay any CGT within 30 days.

Please see the following detailed guide to the filing requirements.

How many days can I spend in the UK and still be non-resident

It is no longer a simple matter of limiting your time in the UK to a number of days. This can be a complicated matter and we advise that you seek professional advice. Please also see our guide to the Statutory Residency Test.

What is split year treatment?

When you move in or out of the UK, the tax year is usually split into 2 – a non-resident part and a resident part. This means you only pay UK tax on foreign income based on the time you were living here. This is called ‘split-year treatment’.

For more detailed guidance on this please see the following guide.

What is the statutory residency test?

The Statutory Residency Test (SRT) allows you to work out your residence status for a tax year. Each tax year is looked at separately, so you may be resident in the UK in one year but not the next, or vice versa.

The SRT takes into account the amount of time you spend and, where relevant, work in the UK along with any ties you have to the UK.

This can be complicated and you should seek professional advice if in doubt. For more detailed guidance please see the following guide.

Globe icon Fees for single owner

Single owner

One
property

Easy tax returns for individuals living outside the UK and owning a single UK rental property, with a simple fixed fee.

from

£170

+VAT

Single owner

Two
properties

Tax returns for non-UK residents who own two flats or houses here in Britain, taking into account available reliefs and allowances.

from

£190

+VAT

Single owner

Three
properties

For those living abroad and managing three UK properties, our accurate tax return service covers the whole portfolio.

from

£210

+VAT

Single owner

Four properties

With four more more properties in your portfolio, it’s likely to be time for serious tax strategy. Our experts will work with you to make sure you have the right ownership structure and are taking advantage of available reliefs and allowances to keep your liability under control.

Globe icon Fees for joint owners

Joint owners

One
property

If you live abroad and own a flat or house in the UK in partnership with someone else, we’ll manage both tax returns.

from

£300

+VAT

Joint owners

Two
properties

If you and your property-owning partner live overseas and have two premises to let, this is the tax package you need.

from

£340

+VAT

Joint owners

Three
properties

Tax returns for two non-residents sharing ownership of three UK rental properties – one fixed fee, minimum hassle for you.

from

£380

+VAT

JOINT OWNERS

Four properties

With four more more properties in your portfolio, it’s likely to be time for serious tax strategy. Our experts will work with you to make sure you have the right ownership structure and are taking advantage of available reliefs and allowances to keep your liability under control.

Start today

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Our non-resident property tax service is for you if…

You live abroad but own UK property

If you own and rent out property in the UK, even if you live or work overseas, you’ll need to file a tax return in the UK. Just to make things complicated, it can’t be an electronic return if yuo are filing from overseas. Non-resident landlords have to file a paper return by the 31st October after the end of the tax year.

Your UK tax bill seems high

You cannot take shortcuts or avoid the complicated calculations necessary to make real tax savings. If you want to make sure you’re paying only what you owe, you need a specialist property tax accountant – you need us.

You plan to buy more UK property

If you want to establish a full portfolio of property in one of the world’s most lively property markets, we can provide expert advice on business structures, tax planning and the pitfalls of the UK tax system.

a man in glasses smiling

What a refreshing experience

“We are overseas and have a property in the UK. We had a stressful time finding a suitable firm to look after our affairs... What a refreshing experience to find a company that was so helpful, so considerate, and took time to listen to our concerns. Nothing was too much trouble for them. They have just completed my tax return and although I had issues trying to find my way around portals and so on, they were magnificent in guiding me through what I considered to be a maze."

A Jones, July 2019

Via FreeIndex, edited for clarity

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