If you are a private landlord owning multiple properties, you will be paying tax via your self-assessment tax return at your marginal rate of tax, this could be up to 45% if you’re an additional rate taxpayer. This tax is due on your profits (income minus expenses), and mortgage interest is not an allowable expense, but you can claim a basic rate deduction.

The Non-Resident Landlord Scheme (NRLS) requires UK letting agents, referred to as “non-resident landlord (NRL) representatives”, to deduct any tax from rent collected for yourself. A “non-resident landlord representative” can be defined as:

• A person by whom any sums are payable to the non-resident which are to be treated as receipts of a UK property business
• A person who acts on behalf of the non-resident in connection with the management or administration of any such business

A letting agent is a person who fills out the following conditions:

• Has a usual place of residence in the UK
• Acts for a non-resident landlord in the running of their UK rental business
• Has the power to receive the NRL’s income, and will have control over the direction of this
• Is that an excluded person(someone whose activity on behalf of a NRL is restricted to providing legal advice/services)

Letting agents paying tax on behalf of yourself under the scheme will need go through the following process:

1 – Register with HMRC (this can be done online)

2 – Calculate and account for tax due on a quarterly basis due on 5^th July

3 – Complete an annual information return

4 – Pay the tax due

5 – Provide the NRL a tax deduction certificate, called a NRL6

If you don’t have a UK letting agent acting on your behalf and rent is more than £100 per week then tenants must deduct the tax. HMRC may also require tenants to use the scheme even if rent is under £100 a week. Tenants must follow the same steps as a letting agent other than registering with HMRC.

Letting agents and tenants must also ensure they deduct any expenses that will be allowable for yourself when the profits of your rental businesses are calculated. These, however, are not included when calculating the taxable amount.

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