Non-Resident Landlord Scheme (NRL1): How UK Rental Income Is Taxed From Abroad (2026/27)

Why a separate scheme exists for landlords living abroad

UK rental income is taxable in the UK regardless of where the landlord lives, but collecting that tax from someone based overseas is administratively harder for HMRC than collecting it from a UK-resident landlord through the ordinary Self Assessment system. The Non-Resident Landlord Scheme addresses this by shifting the initial tax collection responsibility onto whoever is actually paying the rent in the UK — typically a letting agent, or the tenant directly if there is no agent involved.

Who the scheme applies to

The scheme uses a specific test: a landlord's usual place of abode is outside the UK if they normally live outside the UK for more than six months of the tax year. This is a different test from the general Statutory Residence Test used for overall UK tax residence — it is entirely possible to remain UK tax resident under the general rules while still being classed as a "non-resident landlord" for the purposes of this specific scheme, based purely on where you usually live.

Deduction at source: the default position

If a landlord has not obtained gross payment approval, the party paying the rent — usually a letting agent managing the property — must deduct tax at the basic rate (20%) from the rental income before paying the balance to the landlord. The deduction is calculated on the rent received, after allowing for certain expenses the agent is aware of and entitled to deduct under the scheme's specific rules (which may be narrower than the full range of expenses a landlord could claim through Self Assessment).

This deducted tax is then paid over to HMRC by the agent (or tenant) on a quarterly basis, with an annual reconciliation, effectively acting as a payment on account of the landlord's eventual UK tax liability.

Applying for gross payment: form NRL1

Individual non-resident landlords can apply using form NRL1 to receive their rental income gross — without the 20% deduction at source — provided their UK tax affairs are up to date (or they have never had UK tax obligations before) and are likely to remain so. Once approved, HMRC issues an approval number that the landlord provides to their letting agent, instructing the agent to pay rent gross going forward.

Worked example: the cash-flow case for gross payment

Suppose a non-resident landlord receives £1,500 a month in rent (£18,000 a year), with allowable expenses (excluding mortgage interest, which is restricted under Section 24 for individual landlords) of £3,000 a year, and their actual UK tax liability after all deductions works out to £1,500 for the year.

Without gross payment approval:

The letting agent deducts 20% of the rent (adjusted for known expenses) throughout the year, potentially withholding significantly more than the landlord's actual £1,500 liability — for example, if £2,800 is deducted at source over the year, the landlord has effectively overpaid £1,300, which is only recovered as a refund after filing their Self Assessment return, sometimes many months later.

With gross payment approval:

The landlord receives the full £18,000 rent throughout the year with no deduction, then pays their actual £1,500 liability directly through Self Assessment by the normal payment deadline — avoiding the cash-flow disadvantage of having tax over-withheld and waiting for a refund.

Ongoing obligations even with gross payment approval

It is important to understand that NRL1 approval is purely about how rent is paid — it does not remove the landlord's underlying obligation to file a UK Self Assessment return each year, declare the rental income, claim allowable expenses correctly, and pay any tax due by the normal Self Assessment deadlines. Non-resident landlords should also check whether they remain entitled to the UK Personal Allowance, since this depends on nationality and any relevant double taxation agreement between the UK and their country of residence, rather than being automatic for every non-resident.