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NRL Scheme Guide

So many expats have failed to realise that even though they have left the UK, they still may have to file a UK Tax Return.

OWN A RENTAL PROPERTY IN THE UK

Most individuals who leave the UK and own a house usually rent this out before they leave. I mean, what is the point in leaving your house empty whilst you are abroad, right? Most people fail to recognise though that once they leave the UK and become Non-residents they will then fall into the Non-residents Landlord Scheme.

WHAT IS THE NON-RESIDENTS LANDLORD SCHEME?

HMRC operate a scheme called the Non-Residents Landlord scheme.

The Non-residents Landlord Scheme (NRL) is a scheme for taxing the UK rental income of non-resident landlords.

The scheme requires UK letting agents/tenants (where no letting agent is used) to deduct basic rate tax from any rent they collect for non-resident landlords. It is the letting agents/tenants duty to inform HMRC and if they don’t they could open themselves up to all sorts of penalties.

So effectively the whole rental payment received will be taxed at 20% and the income tax on these will be held at source.

However, you can apply to HMRC to receive your UK rental income with no tax deducted. An application for relief needs to be sent to HMRC and they will subsequently issue you with exempt status from the Non-Residents Landlord Scheme. Therefore you will receive your rent payments with no tax held at source.

SO WHAT DOES THIS MEAN GOING FORWARD – DO I HAVE TO FILE A UK TAX RETURN?

You will have to file a UK tax return every year going forward. You will have to fill out the basic tax return, along with the property income and non-resident pages.

It is unlikely that you will have to pay any UK Income Tax on the property as your personal allowance in the UK (currently £10,000 for the 2014/2015 Tax year) will normally cover it (although this is dependent on how much rental income you receive). The rental income less any tax deductible expenses will be the amount that is chargeable to UK income tax.

However, HMRC have just released a consultation document around the abolishment of personal allowances for non-residents. Which will obviously change the above. We will keep you updated on the changes, to subscribe to updates on this topic Click here.

WILL I HAVE TO PAY TAX ON THE PROPERTY IN THE COUNTRY I AM CURRENTLY RESIDENT?

It is likely that if you have to pay any UK tax on the property, this will be deductible against any overseas tax that you owe due to double Tax Treaties between the UK and wherever you are based. This is of course assuming that these treaties are in place. For more information on this Click here.

IN SUMMARY

If you rent a property out, you will have to file a UK Tax Return and may be applicable to UK Income Tax should any arise.