Although the rain and thunderstorms of late belie the fact, we are currently in the middle of summer. Not too far from back-to-school time in fact (is that a collective parental sigh of relief I hear?) and one of my landlords popped in recently after shopping for shoes and schoolbags with their grand-daughters.
This man and his wife are retired, making a decent income from a small portfolio of properties we manage for them and have just invested in a small holiday home overseas. The plan is to spend the winter months (November through to February inclusive) living in sunnier climes, and return home in March to enjoy family birthdays and summer holiday picnics with their grandchildren.
What my landlord wanted to know was: would this time away from the UK class him as an overseas landlord, and if so, what were the tax implications?
I was able to put his mind at rest – he would need to be out of the country for more than a total of six months in any tax year to qualify as an overseas landlord for tax purposes, so his four months in the sun wouldn’t change things for him.
But this was the latest in a small flurry of queries from current and prospective overseas landlords, so it’s obviously an area worth looking at, and I will cover other aspects of being a UK landlord while non-resident in future blog posts.
For now, let’s focus on tax.
HMRC’s Non-resident landlord’s (NRL) Scheme is responsible for tax on “the UK rental income of persons whose ‘usual place of abode’ is outside the UK”.
All of our overseas landlords have approval from HMRC which allows us to pay their gross rental income to them without deducting tax from it.
You’re eligible to apply for an approval if:
If granted, you’ll be issued with an approval number which you pass on to your agent (or tenant, if applicable) – but note that this is unique to the individual paying you the rent. So, if you changed agents or a new tenant moved in, you’d need to apply for a new approval number.
All the forms you need to apply are here.
Without this approval number it’s up to your agent to deduct tax from your rental income and pay this to HMRC on a quarterly basis.
If you manage your own properties, and your tenant pays more than £100 a week in rent, without an approval number they would be responsible for deducting tax from their rental payment and sending this to HMRC.
If your annual rental income per property is less than £5200, your tenant(s) won’t have anything to do other than send you their rent - whether you have an approval number or not.
This downloadable 60-page document gives a comprehensive overview of the responsibilities of tenants and agents under the NRL Scheme.
We are not qualified to offer tax advice, so do always consult HMRC directly as well as a financial advisor before making any investments.
But if you have any other questions about this or any other buy-to-let and property investment issues – don’t hesitate to pick up the phone, or pop into the office. The kettle’s always on!