Glossary · UK
What is Non-Resident Landlord Scheme (NRLS)?
A UK tax scheme that requires letting agents and tenants to withhold 20% income tax from rental payments made to non-UK resident landlords, unless HMRC has approved the landlord to receive rents gross via the NRL1 application.
Full Definition
The Non-Resident Landlord Scheme (NRLS) applies to individuals, companies, and trustees who receive UK rental income but whose usual place of abode is outside the UK -- broadly, those absent from the UK for six months or more in a tax year. Under the NRLS, letting agents who collect rent on behalf of a non-resident landlord must deduct basic-rate income tax (20%) from the rent before paying it to the landlord, and pay that tax to HMRC quarterly. Where there is no letting agent and the tenant pays the landlord directly, the tenant must deduct tax if the weekly rent exceeds GBP 100 -- though in practice few tenants are aware of or comply with this obligation. Non-resident landlords who want to receive their rental income gross (without deduction) must apply to HMRC using form NRL1 (individuals), NRL2 (companies or trustees). HMRC grants approval if the landlord's UK tax affairs are up to date and they commit to filing UK Self Assessment returns. Letting agents who bring their non-resident landlord clients within the NRLS register using form NRL4, and must file an annual return (NRL6) by 5 July each year showing all payments made and tax deducted. Even with gross payment approval, a non-resident landlord must still file an annual UK Self Assessment return declaring all UK rental income, claiming allowable expenses (mortgage interest finance credit, maintenance, letting agent fees, insurance), and paying any resulting tax. Where the landlord's country of residence has a double taxation agreement with the UK, relief may be available to reduce or eliminate UK withholding tax -- but the UK return obligation typically remains.