Non-resident Landlord Scheme - Ad Valorem

What is a non-resident landlord?

Although the UK does not usually tax non-UK resident individuals, it does tax income derived from activities in the UK such as income derived from UK rental properties.

A non-resident landlord is an individual or company which receive rental income from the UK but who normally live or are based outside of the UK.

What are the tax implications of being a non-resident landlord?

Without the non-resident landlord scheme, non-UK resident landlords could evade their UK tax liability by virtue of their absence from the UK and non-declaration of this income. As a result of this, the government brought in the non-resident landlord scheme.

The scheme applies to non-resident individuals and companies which let out property in the UK.

The non-resident landlord scheme requires income tax at a rate of 20% to be deducted from the rents paid for the property at source. The responsibility for deducting income tax at source therefore falls to the letting agent. Where there is no letting agent, responsibility falls on the tenant.

Credit for this income tax can be claimed on the individual’s tax return, in a similar way to tax deducted at source from employment income.

I always file a tax return at the end of the year – is there any way to opt out of the Non-resident landlord scheme?

An individual or company can apply to HMRC to opt-out of the scheme and receive their rental income gross.

HMRC reserve the right to refuse this application however permission will normally be granted where the individual or company has a good track record with HMRC:

• Tax returns and tax payments have always been made on time.
• The company has never had any UK tax obligations.
• The company does not expect to be liable to pay UK corporation tax for the year in which the application has been made.  

How can Ad Valorem help?

We will be happy to answer any queries you may have regarding the non-resident landlord scheme and how it affects you. We will also be happy to assist with applying to HMRC to opt out of the non-resident landlord scheme.

Please do hesitate to get in touch at enquiries@advaloremgroup.uk if you would like to know more about the services we provide.