Non-Resident Landlord (NRL) Scheme 2026/27

NRL Scheme Basics

The NRL Scheme applies to any person (individual, company, trust, or partnership) whose usual place of abode is outside the UK and who receives rental income from UK property. If you are a non-resident landlord, your letting agent (or tenant if there is no agent) must deduct 20% income tax from your rental income before paying you the net amount. The deducted tax is paid to HMRC by the 19th of the month following the deduction. This is the standard deduction regime. The 20% deduction is applied to your gross rental income, not your profit. This means if you have significant allowable expenses (mortgage interest, repairs, letting agent fees), you could have more tax deducted than you actually owe on your net profit. The agent or tenant must: register with HMRC as an NRL Scheme operator, deduct 20% from all rent payments made to the non-resident landlord, pay the deducted tax to HMRC monthly or quarterly, and provide the landlord with a certificate of tax deducted each year. If you are a non-resident landlord and your letting agent is not deducting tax, you should check whether they are aware of the NRL Scheme rules. The agent is legally required to deduct tax unless you have a gross payment approval letter from HMRC. Tenants who pay rent directly to a non-resident landlord must also deduct tax and account for it to HMRC, though in practice many private tenants are unaware of this obligation.

Applying for Net Income Without Tax Deducted

You can apply to HMRC for approval to receive your rental income without tax deducted (known as gross payment approval). This is beneficial because you pay tax only on your net profit through Self Assessment, rather than having 20% deducted from gross income and then claiming a refund. To apply, complete Form NRL1 (for individuals) or NRL2 (for companies/trusts) and submit it to HMRC. HMRC will approve your application if: your UK tax affairs are up to date (you have filed all required returns and paid all tax due), you are not in default of any UK tax obligations, and you can demonstrate that you will comply with future UK tax obligations. Approval is at HMRC's discretion and can be withdrawn if you fail to comply with your tax obligations. Once approved, you must provide a copy of HMRC's approval letter to your letting agent or tenant, who can then pay your rent without deducting tax. You must still file a Self Assessment tax return each year and pay any tax due on your net rental profit. The approval can be backdated if HMRC is satisfied that your affairs are in order. If you are applying for the first time, expect HMRC to take 4–8 weeks to process your application. It is advisable to apply well before you start receiving rental income. If HMRC refuses your application, you can appeal the decision through HMRC's internal review process or to the First-tier Tribunal.

NRL Return and Self Assessment

Non-resident landlords who receive UK rental income must register for Self Assessment with HMRC and file a UK tax return each year. On the return, you declare your total rental income, allowable expenses, and claim any deductions (including replacement of domestic items relief and the finance cost tax reduction). If you have had tax deducted under the NRL Scheme by your letting agent, you report the gross rent received and the tax deducted on the SA105 property pages. The tax deducted is credited against your total tax liability for the year. If the tax deducted exceeds your liability, you can claim a refund from HMRC when you file your return. If the tax deducted is less than your liability, you must pay the balancing amount by the 31 January deadline. Non-resident landlords are not subject to payments on account if their only UK income is rental income that has had tax deducted under the NRL Scheme. However, if you have gross payment approval and receive income without deduction, you may need to make payments on account. The Self Assessment filing deadline is 31 October (paper) or 31 January (online). If you live abroad, HMRC can accept electronic filing through the HMRC online portal, but you will need to register for a Government Gateway user ID and link it to your Unique Taxpayer Reference (UTR).

Double Taxation Treaties

The UK has double taxation treaties with many countries that can affect how UK rental income is taxed for non-resident landlords. Under most double taxation treaties, rental income from UK property is taxable in the UK (the country where the property is situated), regardless of the landlord's residence. This means you will usually pay UK tax on your rental income, and the country where you live will give you credit (double tax relief) for the UK tax paid, so you are not taxed twice on the same income. The NRL Scheme deduction is designed to ensure that UK tax is collected at source from non-resident landlords. If your country of residence has a double taxation treaty with the UK, you may be able to claim relief from UK tax if the treaty gives the taxing rights to your country of residence. However, for rental income from UK property, most treaties give the UK the primary right to tax. You should check the specific treaty between the UK and your country of residence and seek professional advice. If you pay UK tax on your rental income, you can typically claim foreign tax credit relief in your country of residence to avoid double taxation. You may need to provide evidence of UK tax paid (such as your HMRC tax calculation or certificate of tax deducted) to the tax authority in your country of residence. The UK has an extensive network of double taxation treaties with over 130 countries.

Non-Resident CGT on UK Property

Since April 2015, non-UK residents have been subject to UK Capital Gains Tax on disposals of UK residential property. Since April 2019, this has been extended to include all UK property (commercial and residential, direct and indirect disposals). Non-residents pay CGT on the gain arising from the date the property was acquired (or 6 April 2015 for residential property, whichever is later). The CGT rates for non-residents disposing of UK residential property are the same as for UK residents: 18% for gains within the basic-rate band and 24% for higher-rate gains. The annual exempt amount applies to non-residents as well (£3,000 for 2026/27). Non-residents who own UK property must register with HMRC for Capital Gains Tax purposes and report disposals within 60 days using the online PPD (Property Disposal) return. Non-residents who also let UK property will already be registered for Self Assessment and can report the disposal through their existing account. The non-resident CGT rules are complex, particularly for indirect disposals (selling shares in a company that owns UK property) and for trust structures. Professional advice is strongly recommended for any non-resident disposing of UK property.

FAQs

What is the NRL Scheme?

The Non-Resident Landlord Scheme requires letting agents or tenants to deduct 20% basic-rate tax from rental income paid to landlords who live outside the UK. You can apply to HMRC to receive income without deduction.

How do I apply for gross payment approval?

Complete Form NRL1 (individuals) or NRL2 (companies/trusts) and submit to HMRC. You must be up to date with all UK tax obligations. HMRC will issue an approval letter if your application is successful.

Can I claim a refund of tax deducted under the NRL Scheme?

Yes. If the tax deducted by your letting agent exceeds your actual tax liability (because of allowable expenses or the personal allowance), you can claim a refund when you file your Self Assessment return.

Do I need to pay UK tax on rental income if I live abroad?

Yes. Under most double taxation treaties, the UK has the right to tax income from UK property. Your country of residence will typically give you credit for UK tax paid to avoid double taxation.