Non-Resident Landlord Scheme UK 2026: NRL1 Form, 20% Tax Deduction and How to Get Gross Rents

Last reviewed: 30 April 2026 | Sources: HMRC GOV.UK, Income Tax Act 2007 ss.971–972, Taxation of Income from Land (Non-residents) Regulations 1995

TL;DR — Quick Summary

The Non-Resident Landlord Scheme (NRLS) requires your UK letting agent — or your tenant if there is no agent — to deduct 20% basic rate income tax from your rental income and pay it to HMRC quarterly, unless HMRC has approved you to receive rents gross. You apply for gross payment status using form NRL1 (individuals). Approval is typically backdated to the start of the quarter your application arrives. Even with gross status, you still owe UK income tax on your rental profits — you simply settle it yourself via Self Assessment rather than having it withheld at source.

Key Facts

• NRLS triggers when your 'usual place of abode' is outside the UK — generally 6+ months absence per year
• Default withholding: letting agent deducts 20% basic rate tax from gross rent each quarter
• Tenant obligation: must withhold 20% if rent exceeds £100/week and there is no letting agent
• Gross payment application: form NRL1 (individuals), NRL2 (companies), NRL3 (trustees) — available on GOV.UK
• Quarterly periods: 30 June, 30 September, 31 December, 31 March — tax due to HMRC within 30 days of each quarter end
• Making Tax Digital (MTD): UK landlords earning over £50,000 must file quarterly digital returns from April 2026
• Source: HMRC — Non-resident landlords scheme, GOV.UK | Income Tax Act 2007 ss.971–972

Who does the NRLS apply to?

The Non-Resident Landlord Scheme applies to any person whose "usual place of abode" is outside the UK and who receives rental income from UK property. HMRC considers you to have a usual place of abode outside the UK if you have been absent from the UK for six months or more in the relevant tax year. This is separate from — but often overlaps with — UK tax residence under the Statutory Residence Test. You can be UK tax-resident but still trigger NRLS obligations if you have a usual place of abode abroad.

The scheme applies to individuals, companies, trustees and partnerships. In a jointly owned property, each owner is treated as a separate landlord for their share of the rental income — both must apply separately for gross status if both want to receive rent without deduction.

How the default withholding works

Unless HMRC has issued a written approval for gross payment, your letting agent must:

1. Calculate 20% basic rate tax on your net rental income (gross rent minus allowable expenses) for each quarterly period
2. Pay that tax to HMRC's Accounts Office Shipley within 30 days of the quarter end
3. File a quarterly return (form NRLQ) within the same 30-day window
4. File an annual return (form NRLY) by 5 July each year
5. Provide you with a certificate (form NRL6) showing the tax deducted, which you use to offset against your actual UK tax liability on your Self Assessment return

Where there is no letting agent and you are paid directly by a tenant who pays more than £100 per week, the tenant must operate the scheme. This often comes as a surprise to private landlords who manage their own properties.

How to apply for gross payment status (NRL1)

To receive your rental income without the 20% deduction, apply to HMRC using form NRL1 (for individuals). HMRC will approve the application if:

• Your UK tax affairs are up to date, or
• You have never had UK tax liabilities, or
• You do not expect to be liable to UK income tax for the year of application (for example, total UK income is within your Personal Allowance of £12,570)

Approval is typically backdated to the first day of the quarter in which HMRC receives your application. HMRC then sends separate approval notices to your letting agent and/or tenants, authorising them to pay your rent gross from that date.

How to submit NRL1

Gross status does not exempt you from UK tax

A critical point many expat landlords misunderstand: NRL1 approval means your rent arrives in your account without a 20% deduction — it does not mean your rental profits are tax-free. You remain liable to UK income tax on your net rental profits at the applicable rates. You must file a UK Self Assessment return each year to declare your rental income, claim allowable expenses (mortgage interest relief at basic rate, repairs, letting agent fees, insurance, ground rent, service charges), and calculate your actual UK tax liability. Any tax due is payable by 31 January following the tax year end.

Allowable expenses for non-resident landlords

The same expenses are allowable for non-resident landlords as for UK-resident landlords:

• Letting agent fees and management charges
• Repairs and maintenance (not improvements)
• Buildings and contents insurance
• Mortgage interest — basic rate relief only (20%), capped since 2020/21
• Ground rent and service charges (leasehold properties)
• Accountancy fees for preparing rental accounts
• Advertising costs for finding tenants
• Council tax and utility bills paid by the landlord

Capital improvements (extensions, conversions, structural alterations) are not allowable as income expenses but may reduce your capital gains tax liability on eventual sale.

Making Tax Digital (MTD) from April 2026

From 6 April 2026, landlords with gross rental income above £50,000 per year must comply with Making Tax Digital for Income Tax (MTD ITSA), which requires quarterly digital submissions of income and expenses to HMRC using approved software. Non-resident landlords are currently exempt from MTD for a transitional period — check the latest HMRC guidance as this exemption may be time-limited. Landlords earning between £30,000 and £50,000 will be required to join MTD from April 2027.

Frequently asked questions

My letting agent is already deducting tax — can I get it back?

Yes. When you file your UK Self Assessment return, the tax deducted by your agent (shown on your NRL6 certificate) is credited against your actual tax liability. If too much was deducted — for example, because allowable expenses reduced your profit significantly — HMRC will refund the excess.

I rent my property myself — does my tenant have to withhold tax?

Yes, if they pay you more than £100 per week directly and there is no letting agent. They must register with HMRC (using form NRL4) within 30 days and operate the quarterly withholding. Many landlords do not know this rule exists — and tenants who fail to comply can face penalties.

Does the NRLS apply if my property is empty?

No. The NRLS applies only when rental income is being received. An empty property generates no rental income and therefore no withholding obligation — though you may still have other UK tax obligations (council tax, SDLT if recently purchased, etc.).

Can I claim the Personal Allowance as a non-resident landlord?

UK and EEA nationals are generally entitled to the UK Personal Allowance (£12,570 in 2025/26). Non-EEA nationals may be entitled under a DTA. The allowance offsets against total UK income including rental profits — if rental profits fall within the allowance, your UK tax liability may be zero even without NRL1 gross status.

What penalties apply if my letting agent fails to operate the NRLS?

HMRC can charge the letting agent penalties for failing to register (up to £300 plus £60/day), filing late returns, and failing to pay withheld tax on time. Landlords are not directly penalised for their agent's failure, but the underlying tax remains due from the landlord regardless.

Sources: HMRC — Non-resident landlords scheme, GOV.UK | HMRC — NRL1 form, GOV.UK | Income Tax Act 2007, sections 971–972 | Taxation of Income from Land (Non-residents) Regulations 1995, SI 1995/2902 | LITRG — Non-resident landlord scheme guidance.

Informational only — not tax advice. Consult a qualified UK tax adviser for your specific circumstances. See our UK Expat Finance hub.