The NRLS is the mechanism by which HM Revenue & Customs (HMRC) collects the tax due on the UK rental income of non-resident landlords. Non-resident landlords are individuals, companies or trustees who receive rental income from property owned in the UK and whose “usual place of abode” is outside the UK.

The scheme requires UK letting agents (or tenants if the weekly rent exceeds £100 and no letting agent is appointed) to deduct basic rate tax (currently 20%) on any rental income they collect on behalf of non-resident landlords and pay this tax over to HMRC on a quarterly basis.

Non-resident landlords can offset any tax deducted under the NRLS against their tax liability when they complete and file their UK Tax Return.

However, it is not necessary for letting agents or tenants to deduct tax from rental income of a non-resident landlord if HMRC informs them by letter that the landlord is approved to receive the rental income gross.

Obligations of letting agents and tenants

A letting agent is a person:

  • Whose usual place of abode is in the UK;
  • Who acts on behalf of a non-resident landlord in respect of the management and administration of his or her UK rental business; and
  • Who is entitled to receive income of that rental business or has control over the direction of that income.

Letting agents will normally be acting in a professional capacity (e.g. estate agents, solicitors and accountants). However, under the scheme a friend or relative of the landlord may also be a letting agent if they meet the criteria set out above.

Letting agents who are required to operate the NRLS must:

  • Register with HMRC within 30 days of the date on which they are first required to operate the scheme;
  • Account quarterly to HMRC for any tax payable under the scheme;
  • Complete an annual information return for the year to 31 March which must be filed with HMRC by 5 July each year;
  • Provide a certificate to the non-resident landlord each year if they are required to account for tax; and
  • Keep sufficient records to demonstrate that they have complied with the requirements of the scheme.

Tenants who are required to operate the NRLS have almost identical obligations as those of letting agents above.

Calculation of the tax by letting agents and tenants

Letting agents operating the NRLS should calculate tax each quarter at the basic rate on rental income less any deductible expenses. For this purpose letting agents should take into account all rental income they receive in the quarter and rental income which is not received but paid away to a third party (including the landlord) at the direction of the letting agent.

Tenants should calculate tax at the basic rate on rental income they pay in the quarter to the landlord and any payments they make in the quarter to third parties, where those payments are not deductible expenses.

Deductible expenses

HMRC has confirmed that it does not expect letting agents (or tenants) to be tax experts in order to operate the NRLS. An expense should only be deducted where the letting agent (or tenant) can be reasonably satisfied that it is an allowable expense in computing the profits of the landlord’s business.

In calculating the profits of a rental business, expenses are generally allowable where they are incurred wholly and exclusively for the purposes of the rental business and they are not of a capital nature.


Letting agents acting on behalf of non-resident landlords have an obligation to register with HMRC. They are required to calculate tax each quarter at the basic rate on rental income after the deduction of any deductible expenses and account for any tax deducted to HMRC.

The letting agent must also provide a certificate to the non-resident landlord confirming the amount of tax deducted and paid over to HMRC for each tax year.