If you’re moving abroad and planning to rent out your UK property, or you live overseas and invest in the UK then there are a few important things to keep in mind. Mainly around taxes and managing your rental while overseas. Here’s a simple, easy-to-read guide to help you understand the process and what steps to take to keep the right side of HMRC. We won’t go into detail about deductible expenses, like repairs, gardening or maintenance – to keep this simple. As Bristol letting Agents, we’re perfectly placed to help you manage your property in the UK, whilst living overseas.
Registering with HMRC: The Non-Resident Landlord Scheme
As soon as you’re out of the UK for more than six months, HMRC considers you a “non-resident landlord.” This means you need to sign up for the Non-Resident Landlord (NRL) Scheme to make sure your tax is handled correctly.
Here’s what you need to do as a landlord:
- Contact HMRC and register for the NRL Scheme. This can be done online through their website or by filling out a form.
- HMRC will assess your tax status and either give permission for you to receive your rent without deductions (this is called receiving rent “gross”) or inform your letting agent to withhold tax from your rental income.
If your UK tax affairs are in order, you can apply to receive your rental income without tax being deducted. If not, your agent will need to deduct tax before paying the rent to you.
Why Does My Letting Agent Deduct Tax?
As a non-resident landlord, UK law requires that your letting agent withhold 20% of your rental income to cover your UK tax obligations, unless HMRC gives approval for the rent to be paid gross. This is to make sure that your tax is paid even while you’re living abroad.
Here’s why:
- Ensures tax compliance: The UK government wants to ensure that taxes are collected on rental income, even if the landlord lives outside the UK. The tax is paid by the letting agent every quarter and should provide you with a statement.
- Avoids penalties: By ensuring tax is paid upfront, you can avoid any future penalties, interest charges, or investigations from HMRC.
If HMRC approves gross payments, your agent won’t need to withhold tax, but you will still be required to declare the rental income on your annual UK tax return. This means the letting agent will pay you your total rent per month, minus any fees, and then you’re responsible for declaring your tax each year.
Key Dates: When Payments Are Due to HMRC
As your agent, it’s their responsibility to deduct the correct amount of tax and forward it to HMRC on your behalf. These payments are made on a quarterly basis, and the due dates are:
- 30 June (for rent received between 1 April and 30 June)
- 30 September (for rent received between 1 July and 30 September)
- 31 December (for rent received between 1 October and 31 December)
- 31 March (for rent received between 1 January and 31 March)
If tax is being withheld from your rental income, it’s essential that these payments are made on time to avoid any penalties or interest charges from HMRC.
What Statements and Correspondence Should You Receive from Your Letting Agent?
As a non-resident landlord, your agent plays a crucial role in handling your property and your tax responsibilities while you’re overseas. Here’s what you should expect to receive from them:
- Quarterly Statements: Your agent should provide you with a detailed statement of rent collected and tax deducted for each quarter. This helps you track the amounts being sent to HMRC and ensures you’re compliant.
- Annual NRL6 Certificate: At the end of the UK tax year (5 April), your agent must provide you with a certificate, also known as an NRL6, which details:
- The total rent they’ve collected on your behalf and the total tax they’ve deducted and paid to HMRC
- Ongoing Communication: Your agent should keep you updated regularly about any issues with the property, tenant concerns, and legal matters. Given that you’ll be overseas, it’s important they provide clear communication and adapt to time zone differences if needed.
Why It’s Better to Use a Letting Agent While Overseas
Managing a property from another country can be challenging. Here’s why using a letting agent makes sense:
- Tax Compliance: Letting agents are experienced in handling the tax obligations of non-resident landlords. They will ensure all payments are made on time, helping you avoid penalties and interest charges. This alone is worth the headache of being a overseas landlord.
- Full Property Management: Living abroad means you won’t be available to handle day-to-day property management issues. Your agent will take care of:
- Finding and vetting tenant,
- Collecting rent,
- Handling maintenance and repairs,
- Dealing with emergencies (for example, a boiler breakdown or leak)
- They’ll manage everything on your behalf, ensuring the property is well-maintained and tenants are happy.
- Peace of Mind: One of the biggest advantages of using an agent while overseas is the peace of mind they provide. Letting agents know how to navigate UK property laws, handle tenant disputes, and ensure you stay compliant with tax and legal regulations. You can relax knowing your property is in good hands while you focus on your time abroad.
