UK property Owner rental income tax guide

Do you know as an Owner what tax to pay on your rental income from your UK properties?

Read our guide below to understand when you need to pay tax, and what options you have if you are a non-resident of the UK.

UK Tax on Rental Income

Tax is payable on any UK property rental income to the UK Government (Her Majesty’s Revenue and Customs — HMRC).

This tax is payable whether or not you as the property Owner live in the UK.

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UK resident property Owners

If you reside in the UK for more than 6 months in a year, you are considered a UK resident for tax purposes.

For you, we will collect rent from your tenant and remit to you without any tax deducted.

You are then liable for calculating and paying your own rental income tax owed through a Self-Assessment tax return. You should use supplementary pages SA105 for this. We would be happy to introduce you to a UK tax accountant in relation to this.

Non-UK resident property Owners

If you as a property Owner live outside of the UK for 6 months or more in a year, you are classified as a “non-resident landlord” of your rental property, even if you are a British citizen.

There are two options for non-resident landlords:

  1. We pay tax for you — We calculate and pay any tax due, on your behalf, “at source”. In other words, we can deduct the tax you owe from the rent before remitting the rent to you.
  2. Pay tax yourself — You must make an application to HMRC to join the Non-Resident Landlord Scheme. If successful, you will be allowed to receive untaxed rental remittance from us. You will then be able to calculate and pay the tax yourself.

Note – you are still required to fill in a Self-Assessment tax return using supplementary pages SA-105, for any rental income received, regardless of which of the two above options you choose.

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per quarter

We pay tax for you

We calculate the amount tax payment due and arrange to pay it to HMRC every 3 months in accordance with UK tax legislations. Tax payments are deducted from your rent.

Option 1 We pay tax for you

As a non-resident of the UK, if you do not choose option 2 (to calculate and pay tax yourself, see below), we are legally obligated as your UK property agent to deduct a set rate of 20% tax from your quarterly rental income and pay this to HMRC.

This “at source” tax payment will be made automatically. The 20% will be calculated after deducting allowable expenses from your rental income, e.g. property repair expenses, and our agent fees. You do not have to pay tax on those allowable expenses.

You have 3 months from the date of the first rental payment we send you, to provide us with evidence of your successful adoption of option 2 (below), otherwise we will automatically enroll you in the option 1 route.

With option 1, we will issue you a NRL6 certificate at the end of the tax year explaining the amount of tax deducted. You must retain this certificate in case HMRC raises any tax enquiries with you.

We charge £240 (£200 + VAT) per annum for this option 1 service which is deducted from your rent quarterly (£60 per quater).

When you sign up for our Rent Collect, Managed Property, or Full House service, we will ask you if you which of the two tax payment options you wish to choose. For our Find a Tenant service, rent is paid directly to you by the tenants not involving us, and thus you will need to make your own tax arrangements independent of us.

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per application

Pay tax yourself

If you wish to pay tax yourself we will require a NRLS certificate. We can assist you in making the application for a one-off fee of £180.00

Option 2 Pay tax yourself

If you wish to receive gross rental income from us (without any tax deducated). You will need to apply to HMRC to join the Non-Resident Landlord Scheme (NRLS). This appication can be made by using the appropriate form for your particular circumstance from the HMRC website.

There are two forms to choose from:

1. NRL1i – if you are an individual landlord (Please note if the property is jointly owned, each non-resident Owner will need to complete a separate application form.)
2. NRL2i – if the rental property is owned by a company

As we are acting as your UK letting agent, when you complete this form, you will need to provide our agent details to HMRC, as below:

Letting Agent: RentManchesterFlat.com
Address: Bentinck House, 3-8 Bolsover St, Fitzrovia, Manchester, W1W 6AB
Agent Reference Code: 904/NA 050433

If you would like us to assist in preparation of either the NRL1i form,  or the NRL2i form, to HRMC, and to submit and manage the NRLS application for you, the fee is £180.00 (inc. VAT).

If and when HMRC approve your NRLS application, they will contact us to authorise remittance of gross untaxed rent to you.

When you sign up for our Rent Collect, Managed Property or Full House service we will ask you if you want us to calculate and pay tax for you or if you wish to do it yourself.

In cases where you already hold NRLS status with a previous agent other than RentManchesterFlat.com, you will need to write to HMRC and request a change of letting agent on their records, and to provide them with our agency details and reference code, as above. This is because NRLS approval notices are not transferable between agents or tenants.

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