NON-RESIDENT LANDLORD & DISREGARDED INCOME

Joe Bloggs is a non-UK resident but has UK rental income and savings income. Does he need to report this in the UK?

UK property income will need to be reported in the UK.  Any letting agency that manages the property or the tenant that occupies the property has the responsibility of withholding basic rate tax before they pay the rent to the non-resident landlord.

Non-resident landlords may wish to complete NRL1 form (For individuals & NR2 for companies). This is to stop letting agents/tenants deducting 20% tax withholding on gross rents and reporting it to HMRC.

The non-resident landlord will need to complete an SA1 form to register for self-assessment if they do not already complete a self-assessment return.

However, the position is different for savings income. The taxpayer has the option to “disregard certain income” (ITA 2007, s 811 and HMRC HS300).

Disregarded income relates to income such as bank interest and dividends. Unfortunately, it does not cover rental income. Non-residents have two options, they can disregard certain income that has arisen in the UK but they lose their personal allowance or include the income on their UK tax return and retain the personal allowance (assuming they are entitled to the personal allowance. You may need to refer to double taxation treaty to check if personal allowance is given).

However, with the disregarded income, it does not apply to for “split year” tax years and the taxpayer/advisors need to be careful that they are not caught by the temporary non-residency rules (HMRC guidance RDR3 page 71), otherwise the disregarded income will come back into charge on the year of return.

In addition, that may be worth noting, is if you’re about to leave the UK or have left the UK, you do need to complete a P85 form to notify HMRC that you have left the UK if you are not within the self-assessment system.

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