For anyone, owning property in the UK but whose usual home is outside the UK, their tenants or letting agents will need to operate the Non-resident Landlord (NRL) Scheme. Consequently, either the tenant or the letting agent is obligated to deduct basic rate tax from rental income before they pass it onto the property owner. The owner, can then offset this tax off against their own tax bill at the end of the year. Alternatively, the property owner can apply through the non-resident landlords scheme to have your rent their rent paid gross, by seeking approval from the HMRC as a Non Resident Landlord.
To contact our Income Tax Accountant to discuss the Non Resident Landlord scheme further and how it applies to your circumstances please enquire here.
Non Residents FAQ:
Do I Need to Pay Tax On Rental Income From An Investment Property, Or My Previous Home In The UK?
UK tax is due on your income from any rental property if:
- You are non-resident and you get rent from UK property paid directly to you, and you are not registered as a non-resident landlord, your tenant must deduct UK tax at the basic rate – currently 20 per cent.
- If you use a letting agent, they have to deduct the tax from the net rent following expenses and are subject to submissions to the HMRC to validate they are doing so.
- You can apply to have the rent paid to you without tax deducted (Non-resident landlord approval) if you don’t think you’ll have to pay any UK tax, or if your tax affairs are up to date. But you’ll still need to declare the rent on a Self-Assessment tax return if HMRC sends you one.
- If the country you live in has a double taxation agreement with the UK you may be able to get relief in your country of residence for UK tax paid.
How Do I Register as A Non-Resident Landlord?
To register as a non-resident landlord – form NRL1 is available on line or by postal application and can then be forwarded through your accountant or agent to the HMRC as you must still print and sign the form. Each owner of a property must complete a separate form, as your approval is as an individual and not on the specific property. Homes or Houses limited are registered as an agent for the HMRC and can assist with your questions or with your application. Contact Us
As A Property Investor How Does SDLT Affect Me?
From April 1 2016, anyone purchasing an additional/second property will have to pay an extra 3 per cent stamp duty. The changes apply to companies and individuals no matter how many properties you are purchasing.
As an example from April, second homes owners or landlords will have to pay 3 per cent for the first £125,000 (prior to April 1st the rate for up to £125,000 was 0 per cent and 5 per cent on the amount between £125,001 and £250,00 where it was previously 2%.
Currently freehold property purchases involving transactions less than £40,000 don’t need to pay SDLT or tell HMRC about freehold land and property transactions with a total chargeable consideration of less than £40,000. But the total chargeable consideration includes any linked transactions so caution is advised.
As A Non-Resident Landlord How Does Capital Gains Tax Affect Me?
It used to be the case that if you had one property in the UK, but were a non-UK resident and you sold that property, you would not be liable for any Capital Gains Tax on the sale. However, as of April 6th 2015 a new rule was introduced which saw this loophole closed.
Key elements to consider with regards to the rule change include:
- What is the value of your property as of April 6th 2015?
- Will the capital gains still fall within your tax allowance?
- What are the capital gains from the sale of the property (i.e. how much was it bought for and how much is it worth)?
- Is it worth taking advantage of rising UK house prices before the new rule comes into play?
- If you are considering buying a UK property, you should factor in Capital Gains Tax if your purchase is as an investment
At What Point Do I Become A Non - Resident For UK Tax?
You’ll be treated as non-resident from the day following your departure from the UK if you can show:
- You left the UK to go abroad permanently or your absence and full-time work abroad lasts at least a full and whole tax year
- Your visits to the UK are less than 183 days in a tax year and average less than 91 days a tax year over a maximum of four consecutive years
The same rule applies to your spouse, civil partner or partner.
Do I Need To Contact HMRC If I Intend To Leave The UK?
If you have left or are about to leave the UK you must tell HM Revenue & Customs (HMRC). If you’re not required to fill in a tax return, you’ll have to complete form P85 Leaving the UK . HMRC will use the information on the form to send you any tax refund you’re owed and work out if you’ll become non-resident. It’s important you enclose parts 2 and 3 of form P45 if you have one as HMRC will not be able to make any tax refund due without them. You’ll need to send the original versions – photocopies won’t be accepted. If you’re leaving the UK to work full-time abroad for a UK based employer for at least a complete tax year, you’ll need to fill in a tax return as well as a form P85.
HMRC - Capital Gains Tax - FAQ's
Click Here to download the frequently asked question's PDF regarding Capital Gains Tax produced by the HMRC.