Taxation of non-resident landlords
Landlords who rent out property in the UK but do not live here may think that they do not need to pay UK tax on their rental income. This may not be the case, since the UK has the right to tax certain income, profits or gains arising within its territory. This includes profits arising from a UK rental property business even where the beneficial owner is not resident in the UK. Therefore, non-resident landlords of UK property will have certain tax obligations placed upon them and these are considered below.
Accountancy services for non-resident landlords
When renting out property, there are numerous taxes you need to consider as a landlord, but there are ways of mitigating your liabilities. By consulting UHY Ross Brooke; a specialist accountant for non-resident landlords, you may find that your tax bill is reduced and your administration becomes much simpler. We offer our landlords the following accountancy services (among others):
- Help with registering as a non-resident landlord
- Self assessment tax returns – preparation and filing
- Assisting with historical tax issues
- Capital gains (CGT) tax calculations and advice including available exemptions and reliefs
- Capital gains tax reporting including the 60 day reporting rule for disposals
- Structuring your property portfolio in the most tax efficient manner
- Advising on Family investment companies
- Preparing for Making Tax Digital
- Stamp duty land tax (SDLT) exemptions and reliefs
- Income tax advice
- Inheritance Tax (IHT)
- Annual Tax Enveloped Dwellings (ATED)
- VAT advice for buying, renting and refurbishing property
- Landlords property management software
- Transfer pricing
UK property includes
- Commercial property
- Holiday homes or rooms in a house whether rented privately or through a third party eg Airbnb, booking.com
- Houses in multiple occupation (HMO) eg student accommodation
- Buy to let private property
Who is considered a non-resident landlord?
A non-resident landlord is defined as having a ‘usual place of abode’ outside the UK, and an absence from the UK of six months or more will mean a person has their usual abode outside of the UK. However, the rules for the NRLS scheme do not follow the UK residency rules for tax purposes and so a person may be UK resident for tax purposes but still be a non-resident landlord.
Companies and trustees as landlords
Companies and trustees can also be non-resident landlords and a similar framework exists for these entities.
Non-UK resident landlords with UK rental profits are likely to be required to register with HMRC for self-assessment and file annual Tax Returns. Any tax liability incurred will be payable by the following 31st January after the tax year end. In some circumstances, payments on account in January and July may be required.
British citizens will be entitled to a UK personal allowance. Other nationals will need to consult the relevant double tax treaty to see whether an allowance is available to them.
Non-resident Landlord Scheme (NRLS)
The NRLS is a legal framework which requires a property agent to deduct basic rate tax from UK rental income before it is paid over to the non-resident landlord, but this obligation may fall onto the tenant. Upon subsequent filing of a Tax Return, the tax paid under the NRLS scheme is available as a deduction when computing the total UK liability.
Are there options?
Clearly, having tax deducted at source will present a cash flow disadvantage. It will also pass unwanted obligations onto the property agent or tenant. There is a solution, but it still requires paying UK tax.
Other tax jurisdictions
It is important to check the position in the country you are tax resident, as you may also have a tax filing obligation and liability in that country.
Get in touch with our team who specialise in non-resident landlords‘ tax issues and see how we can make your life simpler.