Understanding the Non-Resident Landlord Scheme: What Landlords Need to Know
Whether you’re a UK-based landlord or own property here while living overseas, it’s important to understand how HMRC’s Non-Resident Landlord (NRL) Scheme might affect your rental income. This guide is designed for property investors, letting agents, and landlords using limited companies, and addresses the key questions you’re likely to have.
What is the Non-Resident Landlord Scheme?
The NRL Scheme is a tax compliance system run by HMRC that ensures income tax is paid on UK rental income when the landlord normally lives outside the UK. Under this scheme, letting agents or tenants may be required to deduct basic rate tax from rental payments before passing them on to the landlord.
Official guidance from HMRC:
👉 HMRC: Non-resident landlord scheme overview
Who qualifies as a Non-Resident Landlord?
You are classed as a non-resident landlord if you live outside the UK for more than 6 months in a tax year, even if you’re a UK citizen or pay UK tax on other income.
The scheme applies to:
Individual landlords
Companies (including UK-registered companies) if their management and control is overseas
Trustees of rental income
Key legislation:
👉 Income Tax Act 2007 – Chapter 6, Part 15
Does the NRL Scheme apply to UK companies owned by overseas landlords?
Yes, in some cases.
Owning a UK rental property via a UK-registered limited company does not automatically exempt you from the NRL Scheme. The key test is where the company is tax resident, which depends on where the central management and control of the company takes place.
If control is exercised within the UK (e.g. UK-based directors, UK board meetings), the company is likely UK tax resident and not subject to the NRL Scheme.
If strategic decisions are made outside the UK, HMRC may treat the company as non-resident, in which case the NRL Scheme does apply.
What should letting agents do?
Letting agents are responsible for checking whether the landlord is non-resident. If they are, the agent must register with HMRC and deduct basic rate tax (20%) from rent before passing it on—unless the landlord has approval to receive rent gross.
Agents are not required to carry out investigations into tax residency but should act with reasonable care. If a landlord is a company registered in the UK but all directors are based overseas, it’s sensible to request written confirmation of UK tax residency.
How can landlords receive rent without tax deducted?
Landlords (individuals or companies) who fall under the NRL Scheme can apply to receive rent gross (without tax deducted) if:
Their UK tax affairs are up to date, or
They have no prior UK tax obligations, or
They expect no tax liability for the year
To do this, landlords must register with HMRC.
Apply here:
Individuals (NRL1 Form): Apply online or download form NRL1
Companies (NRL2 Form): NRL2 – Companies letting UK property
Trustees (NRL3 Form): NRL3 – Trustees of rental income
Landlords will then receive an approval letter which should be provided to their letting agent.
What happens if you don’t register?
If a non-resident landlord does not register under the scheme:
The letting agent or tenant must deduct 20% tax from rent
This tax is paid directly to HMRC
The landlord will receive the net amount, which could impact cash flow
Letting agents who fail to comply may be held liable for unpaid tax.