NON RESIDENT LANDLORD  SCHEME  FOR  TAX

A non-resident individual is  liable to UK income tax on rental profits arising from a property in the UK. One should registration under the Non-Resident Landlords Scheme.

HMRC  then requires the letting agent to deduct basic rate tax, which is currently 20%, on the amount of rent received less any allowable expenses paid by the letting agent or tenant. If there is no letting agent and the tenant pays £100 or more per week for rent , the tenant has to deduct the tax as directed. Any expenses deductible from the rent have to be revenue in nature and wholly and exclusively incurred for the rental business, for example advertising costs of attracting new tenants, ground rent, insurance on buildings and contents and provision of services .

The letting agent or tenant is required to account for the income tax deducted  every quarter  to HMRC. They should also complete an annual information form and provide the non-resident landlord with a tax deduction certificate.

Any expenses incurred by the landlord personally are not taken into account by the letting agent or tenant. When additional expenses are factored in on the  tax return, including mortgage interest the  landlord who  is a basic rate taxpayer may have to reclaim some  tax  back. If  the landlord is a higher  rate or  additional  rate   taxpayer then additional tax  may become due.

Under the non-resident landlord scheme it is, however, possible to apply to HMRC to receive the rental income gross. If HMRC agrees to gross payment , HMRC advises the letting agent or tenant not to deduct tax from any rental payments and tax is paid via Self Assessment. An application can be made provided the landlord’s UK Tax affairs are up-to-date, or he has never had any UK tax obligations or he does not expect to be liable to UK tax.

Non-resident landlord should ensure  that their tax affairs are up-to-date  and tax returns are not late  to  retain gross payment  status.

UK  rental income is not part of  any double tax treaty arrangement. Tax is due in the jurisdiction where the  land is situated.

When selling  the UK  residential property HMRC  has  to be notified  within 30 days. Following the  March 2015 rebasing  capital gains tax will be due  on any gain.