What Is the Non-Resident Landlord Scheme? A Guide for Tower Hamlets Landlords
By Wextons | Created on 19th June 2026
If you own a rental property in the UK but live abroad, you’ve probably come across the term “Non-Resident Landlord Scheme” – and wondered what it actually means for your rent.
So, what is the Non-Resident Landlord Scheme? In short, it’s the system HMRC uses to collect tax on UK rental income when the landlord’s usual home is outside the UK. For landlords letting property in Tower Hamlets and the surrounding areas, understanding how it works can save you from unexpected deductions, paperwork headaches, and even penalties.
This guide covers exactly who the scheme applies to, how the tax is collected, how to apply to receive your rent in full, and what’s changing from 2027. Whether you’re letting a flat in Canary Wharf while working overseas or managing a portfolio of properties in Wapping from abroad, this is what you need to know.
What Is the Non-Resident Landlord Scheme (NRLS)?
The Non-Resident Landlord Scheme (NRLS) is an HMRC scheme that governs how tax is collected on rental income from UK property when the landlord’s usual place of abode is outside the UK. It applies regardless of nationality, a British citizen who has relocated abroad for work is treated the same way under the scheme as a foreign national who has never lived in the UK at all.
The scheme can apply to individual landlords, companies, and trustees. Its purpose isn’t to charge non-resident landlords more tax than UK residents, the underlying tax liability is broadly the same, but to make sure tax is actually collected from landlords HMRC might otherwise struggle to reach once they’ve left the country. Where it differs from ordinary income tax is the collection method: rather than relying solely on a Self Assessment return submitted once a year, the NRLS builds in a withholding mechanism so tax is deducted as the rent is paid.
Who Does the Non-Resident Landlord Scheme Apply To?
You’re classed as a non-resident landlord if your usual place of abode is outside the UK, which generally means living abroad for six months or more in a 12-month period. This catches a wide range of people: UK nationals who’ve moved overseas for work, foreign nationals who’ve bought UK property as an investment, and anyone whose main residence is no longer in the UK regardless of how long they’ve owned the property.
A few nuances are worth flagging. Members of HM Armed Forces posted overseas are treated the same as any other non-resident landlord under the scheme, there’s no special exemption for service personnel. And where a property is jointly owned by a married couple or civil partners and only one of them lives abroad, the scheme applies only to that person’s share of the rental income; the UK-resident partner deals with their share through the normal tax rules.
It’s also worth distinguishing the NRLS test from general “tax residence.” The scheme looks at where you usually live, not your formal residence status under the Statutory Residence Test. The two can sometimes point in different directions, so it’s worth checking your position carefully rather than assuming one determines the other.
Non-Resident vs UK-Resident Landlord: What’s the Difference?
Tax Approach
UK-Resident Landlord
Non-Resident Landlord
Tax collection
Self Assessment only
Withholding at source by agent/tenant (unless approved for gross payment)
Who deducts tax
No one – landlord pays directly
Letting agent, or tenant if no agent is used
Self Assessment required?
Only above certain income thresholds
Yes, every year, regardless of profit or loss
Can apply to receive rent gross?
Already receives rent gross
Yes, via NRL1, NRL2, or NRL3
Tax rate on rental profit
Same income tax bands as other UK income
Same bands, but withholding is at the basic/property rate
How Does the Non-Resident Landlord Scheme Work?
At its core, the NRLS works on a withholding basis. If you use a UK letting agent to manage your property, the agent is required to deduct tax from your rent before passing the balance on to you, and to pay that tax over to HMRC every quarter. If you don’t use a letting agent and instead let directly to a tenant, the obligation shifts to the tenant, but only where the rent is more than £100 a week. Below that threshold, tenants aren’t required to operate the scheme.
The tax withheld is calculated at the basic rate on your net rental income (rent received minus allowable expenses the agent or tenant can reasonably verify), not on the gross rent. Currently, this basic rate is 20% – though, as covered further down, this is due to rise to 22% from April 2027.
It’s an important point that many landlords miss: tax withheld under the NRLS isn’t your final bill. It’s collected on account, and reconciled against your actual UK tax liability when you file your Self Assessment return. If too much has been withheld, you can claim the difference back.
What Are Landlords’ Obligations Under the NRLS?
Being subject to the scheme doesn’t remove your own responsibilities. As a non-resident landlord, you must:
Notify HMRC that you’re chargeable to tax on your UK rental income, if you haven’t already registered.
File a UK Self Assessment tax return every year, whether your property made a profit or a loss, and whether or not tax has already been withheld at source.
Keep HMRC updated if your circumstances change. For example, if you return to live in the UK partway through a tax year.
HMRC can charge penalties for late or missing returns in exactly the same way as for any other Self Assessment taxpayer, on top of any NRLS-specific issues.
How to Apply to Receive Rent Without Deduction (Gross Payment Status)
If you’d rather receive your rent in full and deal with the tax through your annual return instead, you can apply for what’s commonly called “gross payment status.” This doesn’t necessarily reduce your tax bill, it simply changes when and how you pay it.
Check you meet HMRC’s eligibility criteria (broadly, that your UK tax affairs are up to date, or you have none outstanding).
Complete the relevant NRL1, NRL2, or NRL3 form with your personal, property, and agent/tenant details.
Submit the form to HMRC, either online (if you have a Government Gateway account) or by post.
Wait for HMRC to process the application: this typically takes around 30 days, though it can run longer during busy periods.
Once approved, HMRC writes to your letting agent or tenant directly, authorising them to stop withholding tax, usually backdated to the start of the quarter in which your application was received.
Approval isn’t automatic or permanent. HMRC can refuse an application where it isn’t satisfied your tax affairs are in order, and can withdraw approval later if you fall behind on your obligations.
The rules work slightly differently if your UK property is owned through a company rather than held personally. Since April 2020, non-UK resident companies have paid Corporation Tax, rather than Income Tax, on their UK property income. This means registering for Corporation Tax Self Assessment, working to a corporate accounting period rather than the standard UK tax year, and filing annual Corporation Tax returns alongside any NRLS withholding obligations that apply to the property itself.
Company landlords still use the NRL2 form to apply for gross payment status, and letting agents managing property on behalf of non-resident companies have the same withholding obligations as they would for an individual landlord, unless gross payment approval is in place. If you’re structuring a property investment through a company (for example, to manage a portfolio of lets across Tower Hamlets) it’s worth getting tailored tax advice, as the interaction between Corporation Tax rules and NRLS withholding can catch out landlords used to the personal tax version of the scheme.
What Are Letting Agents’ and Tenants’ Obligations Under the NRLS?
If you manage your property through a UK letting agent, the agent carries most of the day-to-day administrative burden. Letting agents acting for non-resident landlords must:
Register with HMRC as required under the scheme.
Withhold tax from rental income each quarter and pay it over to HMRC, even in quarters where no tax is actually due.
Complete an annual information return (form NRLY) by 5 July each year, covering the tax year just ended.
Provide each non-resident landlord with a certificate showing the tax deducted, also by 5 July.
Where there’s no letting agent and a tenant pays rent of more than £100 a week directly to a non-resident landlord, the same broad obligations fall to the tenant instead – registering with HMRC, deducting tax, and making the relevant returns. This is one of the more commonly missed parts of the scheme, since many tenants have no idea the obligation applies to them.
The Non-Resident Landlord Scheme and Making Tax Digital (MTD)
Making Tax Digital for Income Tax began rolling out from April 2026, requiring landlords and sole traders with gross income over £50,000 to keep digital records and submit quarterly updates rather than a single annual return. If you’re a non-resident landlord filing under the SA109 supplementary pages, there’s currently a temporary exemption from these MTD requirements – expected to last until at least April 2027. It’s a welcome breathing space, but worth keeping an eye on, since HMRC has signalled this is a delay rather than a permanent carve-out.
Upcoming Changes to the Non-Resident Landlord Scheme
Following the Autumn Budget 2025, a significant change is coming to how property income is taxed across the board, and it directly affects NRLS withholding. From 6 April 2027, the government is introducing a new, separate set of income tax rates specifically for property income, rather than taxing it under the same bands as other earnings. The new property income tax rates will be:
22% at the property basic rate (up from 20%)
42% at the property higher rate
47% at the property additional rate
Because NRLS withholding is set at the property basic rate, this means the standard withholding rate for non-resident landlords will rise from 20% to 22% from April 2027 onward. If you currently have gross payment status, this change won’t affect how your rent is paid to you, but it will affect your eventual tax liability when you complete your Self Assessment return, so it’s worth factoring into any longer-term cash flow planning.
What Happens If a Landlord or Agent Doesn’t Comply With the NRLS?
Non-compliance carries real financial consequences. Letting agents and tenants who fail to register, deduct tax incorrectly, or submit late or inaccurate quarterly and annual returns can face penalties of up to £3,000 per incorrect or missing return. Interest is also charged on any tax paid late, typically running from 30 days after the end of the relevant quarter. For non-resident landlords themselves, the usual Self Assessment late filing and late payment penalties apply on top of any NRLS-specific issues. So the cost of getting it wrong can add up quickly from multiple directions at once.
How Can Wextons Help Non-Resident Landlords?
Living overseas shouldn’t mean losing sleep over UK tax compliance. As experienced letting agents covering Tower Hamlets and the surrounding areas, we manage the practical side of the Non-Resident Landlord Scheme on behalf of our landlords – registering correctly with HMRC, handling quarterly withholding and annual returns where required, and supporting landlords through the gross payment application process where it makes sense for their circumstances. We also work alongside landlords’ accountants to make sure nothing slips through the cracks between property management and tax filing.
Whether you’re new to letting from abroad or have been an overseas landlord for years, having a local agent who understands the NRLS inside out takes one significant item off your plate – explore our landlord services here.
In Conclusion
The Non-Resident Landlord Scheme exists to make sure UK tax is collected properly when a landlord’s usual home is overseas – but understanding how it works puts you back in control, whether that means managing quarterly withholding smoothly or applying for gross payment status so you receive your rent in full. With the withholding rate set to rise to 22% from April 2027, now is a sensible time to review how your property income is being managed.
If you’re letting a property in Whitechapel, Bethnal Green, or anywhere else across Tower Hamlets and would like support managing your NRLS obligations, get in touch with Wextons today – we’re here to make letting from abroad as straightforward as possible. If you want an added layer of support, use our guaranteed rent service, which ensures you’re paid rent each month and includes complete management of your properties.
Frequently Asked Questions
What is a non-resident landlord for UK tax purposes?
A non-resident landlord is an individual, company, partnership or trustee who receives UK rental income but whose usual place of abode is outside the UK – typically meaning they live abroad for six months or more of the year. It’s possible to be a UK resident for general tax purposes while still being classed as a non-resident landlord under the NRLS specifically.
Do non-resident landlords pay tax on UK rental income?
Yes. Non-resident landlords pay UK Income Tax on rental profits at the same rates as UK residents. Tax is usually collected at source by a letting agent or tenant under the Non-Resident Landlord Scheme (NRLS), unless the landlord has been approved by HMRC to receive income gross and settle tax themselves via self-assessment.
What is the Non-Resident Landlord Scheme (NRLS)?
The NRLS is the set of HMRC rules governing how tax is collected on UK rental income paid to landlords living overseas. By default, tax is deducted before the rent reaches the landlord, either by the letting agent or, where there’s no agent and rent exceeds £100 a week, by the tenant.
Can a non-resident landlord receive rental income without tax deducted?
Yes, if approved by HMRC. Landlords can apply to receive their rental income gross using the NRL1 form (individuals), NRL2 form (companies) or NRL3 form (trusts). To qualify, their UK tax affairs must be up to date and they shouldn’t expect to have UK tax liabilities for the year of application. Tax is then settled later via self-assessment.
What are the current non-resident Capital Gains Tax rates?
For residential property, non-resident individuals pay Capital Gains Tax at 18% if they’re a basic rate taxpayer, or 24% if they’re a higher or additional rate taxpayer, on the gain above the £3,000 annual exempt amount.
Do non-resident landlords pay Capital Gains Tax when selling a UK property?
Yes. Non-resident landlords are liable for UK Capital Gains Tax on the disposal of UK residential property, calculated on the gain after deducting allowable costs and the annual exempt amount. This applies regardless of where the landlord is tax resident, and double taxation treaties don’t generally provide relief from this charge.
How long do non-resident landlords have to report and pay Capital Gains Tax after a sale?
Non-resident landlords must report the disposal and pay any Capital Gains Tax due within 60 days of completion, using HMRC’s Capital Gains Tax on UK property service. This is a separate, faster deadline from the annual self-assessment tax return.
Do non-resident companies pay Capital Gains Tax or Corporation Tax on UK property?
Non-UK resident companies pay Corporation Tax rather than Capital Gains Tax on any gain made when selling UK property, mirroring how they’re taxed on rental income rather than under the individual income tax rules.
What forms do letting agents need to register for the NRLS?
Letting agents operating the NRLS must complete an NRL4 form to register, deduct the appropriate tax from rent each quarter, file an annual NRLY return, and issue the landlord an NRL6 certificate confirming the tax paid for their own tax return.
Do double taxation treaties reduce UK Capital Gains Tax for non-resident landlords?
Generally, no. Unlike some other forms of UK tax, double taxation treaties typically don’t provide relief from Capital Gains Tax on UK residential property disposals, meaning non-resident landlords are usually liable for the full UK CGT charge regardless of treaty arrangements with their country of residence – though it’s worth checking local tax rules for any relief available in their own country.
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A leading London real estate agents consultancy with nearly 20 years of experience, specialising in guaranteed rent and letting services. We deliver the highest standard of management on the market and an unrivalled customer experience by ensuring guaranteed rent on your property.
