HMRC Non-Resident Landlord Scheme (NRLS) Guide 2026

What the Non-Resident Landlord Scheme Actually Covers

The Non-Resident Landlord Scheme (NRLS) is a withholding and reporting scheme for UK rental income where the landlord's usual place of abode is outside the UK. The scheme can apply to individuals, companies and trustees. UK rental income itself remains within the UK tax system even where the landlord lives abroad.

Who Is a Non-Resident Landlord for NRLS Purposes?

For NRLS purposes, a non-resident landlord is a person who has UK rental income and a usual place of abode outside the UK. HMRC's internal guidance explains that a landlord who lives outside the UK for more than six months, or is expected to do so, is generally within the scheme. Residence for other UK tax purposes is not the sole deciding factor.

How the 20% NRLS Withholding Works

The standard NRLS rate is the basic rate of Income Tax, currently 20%. However, it is inaccurate to describe the calculation simply as 20% of every pound of gross rent. Letting agents and qualifying tenants can deduct certain expenses that are allowable under the NRLS rules before calculating the tax to be accounted for. The withholding is an amount on account and may differ substantially from the landlord's final tax liability.

Letting Agents: When They Must Operate NRLS

If a letting agent receives or controls UK rent for a landlord whose usual place of abode is outside the UK, the agent can be required to operate the NRLS. The agent must register, deduct and account for tax, make quarterly returns where required and provide the appropriate annual certificate to the landlord.

Tenants: When Does the £100-per-Week Rule Apply?

The £100-per-week threshold is a de-minimis rule for certain tenants, not a general NRLS threshold. A tenant normally operates the scheme when they pay more than £100 per week directly to a non-resident landlord, or to someone who is not acting as a letting agent. HMRC can also require a tenant to operate the scheme where the landlord's total rent exceeds £100 per week even if the amount paid by that particular tenant is below £100.

Quarterly NRLS Returns and Payments

Agents and tenants who operate the NRLS account for tax quarterly. The NRLS quarters end on 30 June, 30 September, 31 December and 31 March. Form NRLQ and the relevant payment are due within 30 days after the end of the quarter. If no tax is due for a quarter, a quarterly return is generally not required unless HMRC tells the agent/tenant to submit one.

Annual NRLY and NRL6 Responsibilities

The annual NRLS reporting process is separate from the quarterly NRLQ process. Where required, the agent or tenant submits the annual information return NRLY by 5 July and provides the landlord with a certificate NRL6 by 5 July. The landlord should keep the NRL6 certificate and use the tax deducted in their UK tax calculation.

NRL1, NRL2 and NRL3 Gross-Rent Applications

The gross-rent approval forms depend on the type of landlord. NRL1 is for individuals, NRL2 is for companies and NRL3 is for trustees. Where HMRC grants approval, the agent or qualifying tenant can pay the landlord without deducting NRLS tax. Gross-rent approval is not a tax exemption.

Conditions for Gross-Rent Approval

HMRC can approve gross payment where the landlord's UK tax affairs are up to date, where they have not previously had UK tax obligations, where they do not expect to be liable to UK Income Tax for the year of application, or in certain sovereign-immunity cases. HMRC can refuse or withdraw approval where it is not satisfied that the information is correct or that the landlord will comply with UK tax obligations.

What NRL1 Approval Does and Does Not Do

NRL1 approval changes the collection mechanism rather than removing the landlord's UK tax liability. The landlord receives rental income gross and then determines the actual UK tax liability through the applicable UK tax-reporting process. If tax is due, it remains payable even though no 20% amount was deducted by the agent or tenant.

Self Assessment and SA105

Form SA105 is the UK property supplementary page used with SA100 to report UK property income and expenses. A non-resident landlord who has to file Self Assessment can use SA105 for the UK property business. However, it is too broad to say that every NRLS landlord automatically has to file SA105 every year: the underlying Self Assessment filing obligation depends on the person's circumstances.

Section 24 Finance-Cost Restriction for Individual Residential Landlords

For individuals and certain trustees with residential property finance costs, Section 24 restricts the deduction of finance costs from property income and instead gives a basic-rate tax reduction. The reduction is generally 20% of the lower of the relevant finance costs, property-business profits and adjusted total income above the Personal Allowance. The reduction cannot be used to create a tax refund.

Section 24 Does Not Apply in the Same Way to Companies

The residential finance-cost restriction described in Section 24 is an Income Tax rule affecting individuals and certain trustees. Non-UK resident companies are within the UK Corporation Tax regime for their UK property business and do not use the individual Section 24 basic-rate tax-reduction mechanism in the same way.

NRLS and Double Taxation

UK tax remains chargeable on UK rental income even when the landlord is non-resident. A landlord's country of residence may also tax the same rental income. Where an applicable double-taxation agreement exists, relief may be available in the residence country or under the treaty/domestic rules. NRLS withholding itself is not a substitute for double-tax relief.

NRLS and Making Tax Digital for Income Tax

NRLS withholding and Making Tax Digital for Income Tax are separate systems. A non-resident individual landlord can potentially be within MTD for Income Tax if their qualifying income meets the applicable threshold and no exemption applies. Being in or out of NRLS does not by itself determine MTD status.

Practical 2026 Non-Resident Landlord Workflow

A correct 2026 analysis should first establish whether the landlord is within NRLS by checking UK rental income and usual place of abode. It should then identify whether a letting agent or tenant operates the scheme, calculate withholding after relevant NRLS-allowable expenses, check gross-rent approval, separate NRLS reporting from Self Assessment, calculate actual property-business tax and then consider MTD and double-tax relief.

HMRC Let Property Campaign (LPC) — Voluntary Disclosure Framework

The HMRC Let Property Campaign (LPC) is a dedicated voluntary disclosure initiative for individual residential landlords who have un-declared or under-declared rental income from UK property. Disclosing through the LPC before HMRC opens a formal tax investigation (unprompted disclosure) yields substantially lower penalty rates compared to an inquiry.

LPC Disclosure Form — 'Income for the Year' Net Profit Rule

In the online HMRC Let Property Campaign disclosure form, the first entry box labeled 'Income for the year' requires the NET TAXABLE RENTAL PROFIT (Gross Rent minus Allowable Property Expenses and allowable Section 24 finance-cost relief), NOT gross rental turnover. Entering gross rent into this box causes the portal to calculate tax on gross revenue, leading to a massive overstatement of tax owed. A full expense breakdown (gross rent, repairs, management fees, mortgage interest credit) must be detailed in the additional information text box provided in the portal.

LPC Interest Calculation — Late Tax vs Payments on Account

Statutory interest under the Let Property Campaign disclosure portal is calculated strictly on the main net unpaid tax liability for each year, running from the statutory due date (31 January following the tax year) up to the disclosure date. Late-payment interest on hypothetical Payments on Account is NOT included in the LPC self-calculation tool. You compute statutory late interest only on the net annual tax owed.

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