What is Non-Resident Landlord (NRL) Scheme

/Published:10th October 2025/inLandlords, Tax
Accounting Wise - What is Non-Resident Landlord (NRL) Scheme

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If you own property in the UK but live overseas, you’re not exempt from UK tax rules. Any rental income you receive from UK property may still be subject to UK tax and this is where HMRC’s Non-Resident Landlord (NRL) Scheme comes in.

The NRL Scheme is designed to ensure that tax is collected efficiently from landlords who are not resident in the UK for tax purposes, even if they are based thousands of miles away. Whether you’re an individual landlord, part of a partnership, or a company registered outside the UK, the scheme may apply to you.

In this post, we’ll cover:

  • What the NRL Scheme is and why it exists.
  • Who qualifies as a ‘non-resident landlord’ (it’s not always as straightforward as you might think).
  • How the scheme works in practice for landlords, tenants, and letting agents.
  • The tax obligations you’ll face and how to stay compliant.
  • Practical tips and resources to make managing your rental income from abroad easier.

By the end, you’ll have a clear understanding of how the scheme affects you and the steps you can take to stay on the right side of HMRC.

Quick Tip: Non-resident landlords can sometimes receive their rental income without tax deducted at source if HMRC approves their application under the NRL Scheme. However, this doesn’t mean the income is tax-free – you’ll still need to declare it on a UK Self-Assessment tax return.

Useful resource: HMRC Non-Resident Landlord Scheme guidance (Gov.uk)

What is the Non-Resident Landlord (NRL) Scheme?

The Non-Resident Landlord (NRL) Scheme is a UK tax system operated by HMRC that ensures rental income from UK property is taxed, even when the landlord lives abroad.

In simple terms, the scheme applies when:

  • A landlord receives rental income from property located in the UK; and
  • The landlord’s usual place of residence is outside the UK (this can include both individuals and companies registered overseas).

Under the scheme:

  • Letting agents (or tenants, if no agent is involved and rent is more than £100 per week) must deduct basic rate tax (currently 20%) from the gross rental income before paying the balance to the landlord.
  • These deductions are then sent directly to HMRC as advance payments of the landlord’s UK tax liability.
  • The landlord will still need to complete a Self Assessment tax return to calculate the final tax due (taking into account any allowable expenses, reliefs, or double taxation treaties).

Example

If a non-resident landlord charges £1,000 rent per month:

  • The letting agent deducts £200 (20%) and pays it to HMRC.
  • The landlord receives £800.
  • At year-end, the landlord declares the full £12,000 rental income on their UK Self-Assessment. They may be able to claim expenses (such as repairs, mortgage interest, or letting agent fees) that reduce their taxable profit, and any overpaid tax may be reclaimed.

Standout Tip: If you’re a non-resident landlord, you can apply to receive your rental income gross (without tax deducted at source) by registering with HMRC under the NRL Scheme. However, this only changes how tax is collected – it doesn’t remove your obligation to file a UK tax return.

Useful links:

Who Counts as a Non-Resident Landlord?

You are classed as a non-resident landlord (NRL) if you:

  • Live outside the UK for more than 6 months in a tax year; and
  • Receive rental income from property located in the UK.

This definition applies regardless of whether you are:

  • An individual who owns a buy-to-let or second home.
  • A company registered overseas but receiving rent from UK property.
  • A trust or partnership with rental income from UK property.

Key Clarifications

  • Not about nationality or domicile: The scheme is based on where you live, not your passport. A British citizen living abroad for more than six months could still fall under the NRL Scheme.
  • Temporary absences: If you’re only abroad for a short period (e.g. under six months), you’ll usually remain a UK resident landlord.
  • Companies: A company is considered a non-resident landlord if its registered office or main place of business is outside the UK.
  • Trusts and partnerships: Trustees or partners based abroad may also be caught by the scheme.

Example

  • A UK national who relocates to Dubai for work but keeps their London flat rented out is a non-resident landlord.
  • An overseas company that owns a block of flats in Manchester is also a non-resident landlord.

Tip: If you split your time between the UK and another country, it’s worth double-checking your tax residency status (using HMRC’s Statutory Residence Test). Being abroad for more than six months usually triggers non-resident landlord status, but other factors can also apply.

Useful links:

Expert Accounting for UK Landlords and Property Rental Businesses

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How Does the NRL Scheme Work?

If you have not applied for or been granted NRL approval:

  • Letting agents (or tenants, where rent exceeds £100 per week and no agent is used) must deduct basic rate tax (20%) from your rental income before paying it to you.
  • They must then submit this tax to HMRC each quarter (due by 30 days after the quarter ends: 30 June, 30 September, 31 December, 31 March).
  • You receive your rent net of tax.

Example: On rent of £1,200 per month, the letting agent deducts £240 (20%) for HMRC, paying you £960. At year-end, you’ll still need to file a Self Assessment tax return to calculate the correct liability. If your expenses reduce your taxable profit, you may reclaim some of the tax already deducted.

With NRL Approval

If you apply for and are granted NRL approval by HMRC:

  • You can apply using:
    • Form NRL1 – for individuals
    • Form NRL2 – for companies
    • Form NRL3 – for trustees
  • Once approved, your letting agent or tenant will pay you your full rental income gross (without deductions).
  • You remain responsible for declaring the income and paying any tax due through your Self-Assessment tax return (or Corporation Tax return, for companies).

Example: On rent of £1,200 per month, the letting agent pays you the full £1,200. You then declare the rental income on your Self-Assessment return. If your allowable expenses are £400 per month, your taxable profit is £800, and you’ll be taxed accordingly (which may be lower than the flat 20% deduction).

Tip: Applying for NRL approval can improve your cash flow, since you receive rental income without upfront deductions. However, you must budget for your tax bill – HMRC will still expect payment via Self-Assessment.

Useful links: Apply for NRL approval – HMRC forms (NRL1, NRL2, NRL3)

How to Apply for the NRL Scheme

If you’d prefer to receive your rental income without tax deducted at source, you’ll need to apply to HMRC under the Non-Resident Landlord Scheme.

Step 1 – Choose the Correct Application Form

HMRC has three different forms depending on your circumstances:

  • NRL1 – for individual landlords
  • NRL2 – for companies
  • NRL3 – for trustees

You can apply online or by downloading the relevant form directly from HMRC:
Apply for the Non-Resident Landlord Scheme (Gov.uk)

Step 2 – Provide Your Details

You’ll need to give HMRC:

  • Your personal or company details (including overseas address).
  • The UK property address(es) being let.
  • Details of your tax residency status (HMRC may check this against the Statutory Residence Test).
  • Your UK tax reference number (if you have one).

Step 3 – Wait for Approval

  • HMRC will process your application and, if approved, notify your letting agent or tenant directly.
  • This approval allows them to stop deducting tax from your rent.
  • Processing can take 4–6 weeks, so apply early if you want to improve cash flow.

Step 4 – Continue to File Tax Returns

Even if you receive your rent gross, you are still legally required to:

  • Submit an annual Self-Assessment tax return (for individuals).
  • Or a Corporation Tax return (for non-resident companies).
  • Pay any tax due by the standard HMRC deadlines.

Example: You receive £1,500 monthly rent gross after approval. With £600 of expenses, your taxable profit is £900 per month. This will be taxed via Self-Assessment at your applicable UK tax rate, not at a flat 20%.

Tip: Always keep clear records of rental income, expenses, and any approvals received from HMRC. This not only helps with Self-Assessment but is also essential if HMRC ever opens a compliance check.

Example of the NRL Scheme in Action

Let’s look at how the NRL Scheme works in practice.

Scenario

  • Monthly rent: £1,000
  • Annual rent: £12,000

Case 1 – Without NRL Approval

  • The letting agent must deduct 20% basic rate tax before paying the landlord.
  • Deduction: £200 per month (£2,400 per year).
  • Landlord receives £800 per month (£9,600 per year).
  • At the end of the tax year, the landlord files a Self-Assessment tax return. If their allowable expenses (e.g. mortgage interest, maintenance, insurance) reduce taxable profits, they may be due a refund from HMRC.

For example, if £3,000 of expenses are claimed, the taxable profit is £9,000. The landlord may have overpaid and could reclaim some of the £2,400 already deducted.

Case 2 – With NRL Approval

  • The landlord applies to HMRC and is approved under the NRL Scheme.
  • The letting agent pays full rent gross: £1,000 per month (£12,000 per year).
  • The landlord declares this income via Self-Assessment and pays tax based on their actual taxable profit.

For example, with £3,000 in expenses, taxable profit is £9,000. At 20% tax, the bill is £1,800. This is £600 less than the £2,400 that would have been deducted without approval – improving cash flow and reducing overpayment risk.

Tip: Getting NRL approval doesn’t mean avoiding tax – it simply means you pay the right amount of tax at the right time, rather than having a flat 20% deducted up front.

Useful link: HMRC guidance – How the NRL Scheme works

Common Mistakes with the NRL Scheme

The Non-Resident Landlord Scheme can feel straightforward, but in practice many landlords (and even letting agents) slip up. Here are the most common pitfalls and how to avoid them:

  1. Assuming You Don’t Need to Pay UK Tax Because You Live Abroad

Living overseas doesn’t exempt you from UK tax on UK property income. HMRC has the right to tax rental profits from property located in the UK, regardless of your residency or nationality.
Example: A British expat in Spain lets out their London flat. Even though they pay Spanish taxes, they must still declare the UK rental income under the NRL Scheme.

Tip: If you pay tax in both countries, you may be able to claim relief under a double taxation treaty. (See: UK double taxation treaties – Gov.uk).

  1. Failing to Register with HMRC as a Non-Resident Landlord

Many landlords forget that they need to apply to HMRC to receive rent without deductions. Without registration, letting agents are legally obliged to deduct 20% tax from gross rent.
This often results in overpaid tax and cash flow issues.

  1. Forgetting That Even with NRL Approval, You Must File a Tax Return

NRL approval only changes how tax is collected – it doesn’t remove the obligation to declare rental income.
You must still file a Self-Assessment tax return (or Corporation Tax return for companies) and pay any additional tax due.

Tip: Always diarise the 31 January Self-Assessment deadline (for individuals) and keep accurate records of income and expenses.

  1. Letting Agents Not Deducting Tax When They Should

If a landlord hasn’t provided HMRC approval, the letting agent (or tenant, if applicable) must deduct tax. If they don’t, HMRC can hold the agent liable for unpaid amounts.
This can cause compliance issues for both landlords and agents.

Why Use an Accountant for the NRL Scheme?

While HMRC provides guidance on the Non-Resident Landlord Scheme, the rules can quickly become complex – especially when dealing with tax residency, allowable expenses, and international tax treaties. This is where a qualified accountant adds real value.

How an Accountant Can Help You:

  • Register you for the NRL Scheme: Ensuring the right forms (NRL1, NRL2, or NRL3) are submitted correctly, reducing delays with HMRC.
  • Ensure accurate tax declarations: Completing your Self-Assessment or Corporation Tax return correctly so you don’t underpay (risking penalties) or overpay (tying up your cash).
  • Maximise allowable expenses: Advising on what you can and cannot deduct – such as repairs, insurance, mortgage interest, or letting agent fees – to reduce your UK tax liability.
  • Advise on double taxation treaties: If you also pay tax in your country of residence, an accountant can ensure you don’t pay tax twice on the same rental income.
  • Provide ongoing compliance support: Monitoring deadlines (quarterly agent submissions, 31 January Self-Assessment filing) so you avoid fines and HMRC investigations.

Tip: Many non-resident landlords unknowingly miss out on valuable tax reliefs, such as wear and tear allowances (pre-2016) or deductions for replacement of domestic items. An accountant ensures you don’t leave money on the table.

NRL Scheme Conclusions

The Non-Resident Landlord (NRL) Scheme ensures HMRC collects tax on UK rental income from landlords who live overseas. Whether tax is deducted at source or declared later through Self-Assessment, compliance is essential.

By registering with HMRC and getting the right advice, you can stay compliant while maximising your rental income.

Are you a non-resident landlord earning UK rental income? At Accounting Wise, we’ll handle your NRL registration, tax returns, and compliance so you can focus on your investment.

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NRL Scheme FAQ

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The NRL Scheme is an HMRC system that ensures tax is collected on rental income earned in the UK by landlords who live abroad for more than six months a year.

Any individual, company, or trustee who owns property in the UK but spends more than six months outside the UK in a tax year is considered a non-resident landlord.

Yes. Landlords must apply to HMRC to receive rental income without tax deducted. If they don’t, letting agents or tenants may have to deduct basic rate tax from the rent.

Letting agents (or tenants if no agent is involved) are responsible for deducting basic rate Income Tax from rental payments and sending it to HMRC, unless the landlord has HMRC approval to receive rent gross.

You can apply online or by post using HMRC’s NRL1 form (for individuals), NRL2 (for companies), or NRL3 (for trustees).

Yes, but only if HMRC approves your application. You must still declare the income and pay any tax due through Self Assessment.

If you don’t register, letting agents or tenants are legally required to deduct tax from your rental income before paying you.

Tax is deducted at the basic Income Tax rate (currently 20%) from the rental income, after allowable expenses that the agent is aware of.

Yes. Even if tax is deducted at source, you may still need to submit a Self Assessment tax return to report rental income and claim reliefs or expenses.

You should keep detailed records of rental income, expenses, and any tax deducted by agents or tenants, as HMRC may request them when you file your return.

Glossary of Key NRL Scheme Terms

Non-Resident Landlord (NRL): A landlord who owns UK property but spends more than six months outside the UK in a tax year.

NRL Scheme: HMRC’s system to collect tax on rental income paid to landlords living abroad.

Letting Agent: A person or company responsible for managing rental property and ensuring tax deductions under the NRL Scheme when required.

Tenant Deduction: When no letting agent is used, tenants may be required to deduct basic rate tax from rent before paying the landlord.

NRL1 Form: HMRC form for individuals applying to receive rental income without tax deducted.

NRL2 Form: HMRC form for companies applying under the NRL Scheme.

NRL3 Form: HMRC form for trustees applying under the NRL Scheme.

Gross Rental Income: Rent received before tax or allowable expenses are deducted.

Net Rental Income: Rent remaining after allowable expenses and/or tax deductions.

Self Assessment: The HMRC system where landlords report rental income, claim expenses, and pay any tax due.

Basic Rate Tax: The rate of Income Tax (currently 20%) applied to rental income deductions under the scheme.

Allowable Expenses: Costs that can be deducted from rental income, such as maintenance, insurance, or letting agent fees.

Double Taxation Treaty: Agreements between the UK and other countries to prevent landlords from being taxed twice on the same rental income.
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