The Non-resident Landlord Scheme: keeping all of your rent

The Non-resident Landlord Scheme exists because HMRC cannot easily chase a landlord in Dubai for tax on a flat in Leeds. So it doesn't try. It takes the money at source instead: your letting agent — or your tenant, where rent tops £100 a week with no agent — is legally required to deduct 20% of the rent (after expenses the agent pays) and send it to HMRC every quarter, unless HMRC has told them in writing not to.

Nobody involved is being difficult. The agent that deducts is following the law; the agent that doesn't is the one taking a risk. The landlord's job is simply to know the scheme exists before the first light statement arrives — and most don't.

Getting paid gross

Individuals apply on form NRL1 (companies NRL2, trustees NRL3). HMRC approves applicants whose tax affairs are in order and who undertake to file returns. Approval is sent to your agent, deductions stop, and your tax is settled once a year through Self Assessment like a normal landlord — rather than crudely, at 20% of gross, with your expenses ignored.

Three practical points. Approval is not retrospective, so apply before the tenancy starts if you can — every withheld month is an interest-free loan to HMRC until your return unwinds it. Joint owners each apply separately; one approved spouse doesn't cover the other. And gross payment is not an exemption: the return still happens every year, and HMRC does revoke approvals from non-filers.

What the annual return actually involves

Rental income, minus the real costs of letting: agent fees, repairs and maintenance, insurance, ground rent and service charges, accountancy, advertising for tenants, and replacements of furnishings. Mortgage interest is relieved as a 20% tax credit rather than a deduction — a restriction higher-rate taxpayers feel, and allowance-covered landlords generally don't. Improvements — the extension, the loft conversion — are not expenses; they wait and reduce your capital gain when you sell.

Then the part that makes it a non-resident return: the SA109 residence pages, and the claims that live there. HMRC's own website cannot file these pages, which leaves paper by 31 October, commercial software by 31 January, or an agent. This is not a small point — it is the reason thousands of expat landlords who tried to do the right thing end up filing late.

The allowance question — where the money actually is

Non-residents only get the £12,570 personal allowance if something gives it to them. British and EEA nationality does. Beyond that it depends on the double-tax treaty where you live — some grant it, and some conspicuously don't (Australia's doesn't; an Australian citizen in Sydney with a UK flat gets no allowance, while the British citizen next door gets the full amount). On a typical rental profit the allowance is the difference between a nil bill and £1,800–£2,400 of tax, every single year. It is claimed on the return; unclaimed allowances are simply lost. This is the first thing we check for every new landlord client, and the single most common error in the DIY returns we take over.

What you can and can't deduct, at a glance

Cost	Deductible now?	Note
Agent fees, insurance, service charges, ground rent	Yes	The core of most claims
Repairs and like-for-like replacements	Yes	New boiler yes; first-ever boiler in a new extension, no
Replacement furnishings	Yes	Replacement basis — not the initial furnishing
Mortgage interest	As a 20% credit	Not a deduction since 2020; capital repayments never count
Improvements (extensions, conversions)	No — at sale	Reduces the capital gain instead: keep every invoice
Your flights to 'inspect' the property	No	HMRC has heard this one before

Situations we untangle constantly

• "The agent has been deducting for three years and I've never filed." Good news hiding in the mess: the deducted tax is a credit waiting to be claimed. File the outstanding returns, claim expenses and the allowance, and the refund often funds the accountancy fees for a decade. Then NRL1 for the future.
• "My tenant pays me directly." Over £100 a week, the tenant is technically the withholder — a duty no ordinary tenant has ever heard of. Registering and filing puts you right from your side, which is the side you control.
• "The property makes a loss." File anyway. Losses only exist for carry-forward if they've been claimed, and the approval expects returns regardless. A £2,000 loss recorded now is £400+ of tax saved in a profitable year later.
• "We own it jointly and my wife doesn't work." Then her half of the profit may sit entirely inside her own allowance — two returns, possibly zero tax between them. Where you want unequal shares to push more profit to the non-earner, beneficial ownership and a Form 17 election need arranging — far cleaner done before you leave the UK than after.
• "I hold it through a company." Non-resident companies letting UK property pay corporation tax, file CT600s, face their own interest-restriction rules and use the NRL2. It is a genuinely different compliance stack — don't scale up the personal rules and hope.

Questions we're asked every week

"Can HMRC really expect tax when the mortgage eats all the rent?"

Since the interest restriction, yes, sometimes — higher-rate landlords can owe tax on paper profit that the mortgage consumed in cash. Allowance-covered landlords usually escape. This is a calculation, not a vibe; we run it before you panic.

"What happens when I sell?"

A different regime entirely — the 60-day rule, with its own return, deadline and rebasing opportunities. Tell us before completion, not after.

"Is any of this different in Scotland or Wales?"

The NRL scheme and income tax on property work the same UK-wide for non-residents; devolved rates don't apply to non-resident landlords' property income in practice for the vast majority. What differs is tenancy law and deposits — your agent's problem, and a reason to have a good one.

Our landlord service is £349 a year including the first property and the NRL1; joint owners add a second return at £150.