Tax Implications on Non-UK Resident Landlords

Tax Implications on Non-UK Resident Landlords

HMRC is still doing all it can to collect tax from Non-UK resident landlords who own a property in the UK.

For those landlords who own property in the UK yet reside in a different country, then they will be required to register with HMRC as non-resident landlords, this is a must if they are earning a rental income from the property.

It is common for Non-UK resident landlords to believe that they do not have to pay UK income tax, especially if they are reporting their income in another country. This is an incorrect assumption and under UK domestic law, the UK will have the right tax landlords based on their income from rental properties, even if they have to pay tax in another country.

The Non-Residential Landlord Scheme

It is important that non-UK resident landlords pay tax but in order to do this, the responsibility will fall on either the tenant or the letting agents. As a result, they are required to deduct 20% from the rent before it is paid to the landlord.

This might be something that letting agents are comfortable with doing while they might already be set up on the scheme but for tenants, it might seem daunting to be responsible for paying tax. If this is the case then they can always use the services of a tax return accountant. As they are responsible for making these payments, HMRC would chase them for any unpaid taxes that should have been deducted from the rental payments. Through using a tax accountant, it would ensure that all tax is calculated correctly, helping to reduce the risk of problems.

However, it is possible for non-UK resident landlords to receive rent without any tax deducted. To do this, they can also register with the non-resident landlord scheme, whereby HMRC will give authorisation to the tenant or the letting agent to pass all of the tax reporting over to the landlord. To do this, landlords will need to complete the relevant form and meet some conditions in order to be added to the scheme. This will include being up to date with all UK taxes, including tax that is not related to properties while landlords will need to remain compliant in order to remain on the scheme.

It is also vital that overseas landlords remember that the UK tax year runs from the 6th April until the 5th April the following year. This means that landlords would be required to submit income tax returns by the 31st January if they are filed online and the 31st October if they are submitted using the paper system. At this point, landlords would be required to pay income tax in three instalments which would include the first payment by the 31st January during the tax year, where 50% of the previous year's liability is paid, then on the 31st July in the next tax year, the next 50% is paid for the previous year's liability before making the final payment on the 31st January.

So, non-UK resident landlords will need to ensure that either their tenants, their letting agents or themselves are registered with the Non-Resident Landlord Scheme. However, using the services of an accountant who are regulated by the Association of Chartered Certified Accountants (ACCA) will ensure that their tax requirements are taken care of.

For more information that relates to non-uk resident landlords and tax then why not get in touch with TaxAccoLega. We are tax experts and are on hand to provide advice and guidance where required.

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