Paying rent to a landlord who lives abroad: the tax that letting agents and tenants must deduct
When a landlord's usual home is outside the UK, the duty to collect tax on the rent falls not on the landlord but on the letting agent or, where there is no agent, sometimes on the tenant. It catches a relative collecting rent as readily as a high street agent. Here is who is caught, how the sum works, the quarterly calendar, how a landlord applies to be paid without deduction, and the change to the rate in April 2027.
Why the duty sits with someone else
Section 971 of the Income Tax Act 2007 and the Taxation of Income from Land (Non-residents) Regulations 1995 require tax to be collected at source on rent paid to landlords who live abroad. The landlord remains liable for UK tax on the profit, and the tax deducted is a payment on account that is credited against the final liability. The obligation to deduct and pay, though, sits with the letting agent or the tenant, and an agent who fails to deduct is the person HMRC look to, left to recover the tax from the landlord afterwards.
Who counts as a landlord who lives abroad
The test is not tax residence. It is whether the landlord's usual place of abode is outside the UK, and HMRC normally regard an absence from the UK of six months or more as meaning that it is. The two tests can give different answers, so a landlord who leaves for a long overseas posting is within these rules from the start of it, whatever their residence position turns out to be. A company normally has its usual place of abode outside the UK if its main office or place of business is abroad or it was incorporated abroad, unless it is UK resident for tax purposes. A trust is within the rules only if all of its trustees have their usual place of abode outside the UK.
Who must deduct
In HMRC's words, a letting agent includes anyone who manages property on behalf of a non-resident landlord, and HMRC's Property Income Manual makes clear that this extends to friends and relatives who handle or control the rent, not only to professional firms. An agent whose own usual place of abode is in the UK must operate the rules whatever the rent, even at GBP 100 a week or less. Where there is no agent, a tenant who pays more than GBP 100 a week on average directly to a landlord abroad must operate them. A tenant paying GBP 100 a week or less need do nothing unless HMRC say otherwise. On those definitions, a brother who collects the rent on his sister's flat while she works in Singapore is a letting agent.
How the sum works
Agents and tenants calculate differently. An agent deducts tax at the basic rate, 20 per cent for 2026/27, on the rent received in each quarter less the deductible expenses the agent has itself paid, such as its own fees, advertising, repairs and gardening. A tenant deducts tax on the rent paid, without deducting expenses. The figures are illustrative. An agent collects GBP 4,500 of rent in the quarter to 30 September, pays GBP 540 of its own fees and a GBP 360 repair, and sends the landlord the balance after tax. The tax is 20 per cent of GBP 3,600, which is GBP 720, payable to HMRC by 30 October. Had a tenant paid the GBP 4,500 direct, the deduction would have been GBP 900.
The calendar
Agents register with HMRC on form NRL4, and tenants register by writing to HMRC. Tax for each quarter, ending 30 June, 30 September, 31 December and 31 March, is reported on form NRLQ and paid within 30 days of the end of the quarter. Nil returns are not needed unless HMRC ask for them. By 5 July after the end of the tax year, the agent or tenant sends HMRC an annual information return, form NRLY, and gives each landlord a certificate of the tax deducted, form NRL6, which the landlord uses to claim credit for the tax.
Being paid without deduction
A landlord who lives abroad can apply to HMRC to receive the rent with no tax deducted. Individuals use form NRL1, and there are separate applications for companies and for trustees. HMRC approve where the application is complete and correct and they are satisfied the landlord will meet their UK tax obligations. They then send a separate notice to each agent or tenant named on the application, giving an approval reference and the date from which rent may be paid without deduction, usually the first day of the quarter in which the application was received. Until that notice arrives, the duty to deduct continues. Approval is not an exemption. The landlord still files a UK return and pays tax on the profit, and since 6 April 2020 a non-resident company pays corporation tax, rather than income tax, on its UK property income.
April 2027: the rate moves
From 6 April 2027, property income has its own rates of 22, 42 and 47 per cent, set by the Finance Act 2026. HMRC's technical note on the change says that secondary legislation will be amended to update the rate of withholding under these rules to reflect the new property basic rate. Agents should therefore expect the deduction rate to rise from 20 to 22 per cent once that legislation is made, and should check now that their systems, landlord statements and tenancy paperwork can change with it.
Where it usually goes wrong
Three patterns recur. A landlord moves abroad partway through a tenancy and nobody tells the agent, or the agent never asks. A relative collects the rent informally for years without realising that the rules treat them as an agent at all. And a landlord holds approval for one agent, changes agent, and the new agent pays gross without a notice of its own. An agent can recover from the landlord tax that should have been deducted, but recovering money from someone abroad is rarely straightforward.
A short checklist
For agents: ask every landlord, at instruction and each year, where they normally live, and record the answer. Register before the first quarter in which you collect rent for a landlord abroad. Deduct each quarter unless you hold HMRC's notice naming you, pay within 30 days, and issue the NRL6 by 5 July. For tenants paying a landlord abroad directly: check whether your rent averages more than GBP 100 a week and, if it does, register and deduct. For landlords: if your UK tax affairs are in order, apply for approval, and remember that the return is still yours to file.
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This article is general information only and does not constitute tax advice. Figures and dates are current as at the date of writing; any worked example is illustrative. Always consult a qualified adviser before acting.