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Renting out your property while living overseas?

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Overseas Landlords

The Non-resident Landlord Scheme

If you have rental property in the UK but you live outside of the UK, your tenants or the letting agents you use will need to operate the Non-resident Landlord (NRL) Scheme. They need to deduct basic rate tax from rental income before they pass it onto you. You can set this tax off against your own tax bill at the end of the year.

Examples of expenses which are allowable
Expenses paid by letting agents and tenants which will normally be allowable expenses are:

  • Accountancy expenses for the rental business
  • Advertising costs of attracting new tenants
  • Cleaning
  • Costs of rent collection
  • Council Tax while the property is vacant but available for letting
  • Gardening
  • Ground rent
  • Insurance on buildings and contents
  • Interest paid on loans to buy land or property
  • Interest paid on loans to build or improve premises
  • Legal and professional fees
  • Maintenance charges made by freeholders, or superior leaseholders, of leasehold property
  • Maintenance contracts (for example gas servicing)
  • Provision of services (for example gas, electricity, hot water)
  • Rates
  • Repairs which are not significant improvements to the property, including: mending broken windows, doors, furniture, cookers, lifts, etc painting and decorating replacing roof slates, flashing and gutters
  • Water rates

How Letting Agents and Tenants calculate the amount to tax

When calculating the amount to tax, letting agents/tenants should:

  • add together the rent they actually receive in the quarter plus
  • any rent that they had the power to receive
  • any rent paid away at their direction to another person less
  • any deductible expenses that they paid in the quarter
  • any deductible expenses that were paid away in the quarter at their direction by another person

It is the date letting agents/tenants actually receive/pay the rents (or pay the deductible expenses) that determines when they calculate tax. The periods for which the rents (or expenses) are due are not relevant.

Allowable expenses of a rental business

Broadly, in calculating the profits of a rental business, expenses are allowable where:

  • they are incurred wholly and exclusively for the purposes of the rental business
  • they are not of a ‘capital’ nature