Non-Resident Landlords Scheme (NRLS) Explained: Withholding, NRL1 Approval & HMRC Compliance

Introduction: Why the NRLS Matters for Overseas Landlords

If you own UK rental property but live abroad, HMRC treats you as a “non-resident landlord.” That doesn’t exempt you from UK tax — in fact, it creates extra compliance rules under the Non-Resident Landlords Scheme (NRLS).

Without HMRC approval, letting agents or tenants must deduct basic rate tax from your rental income before paying it to you. Even with approval, you must still report your income through Self Assessment.

This guide explains how the NRLS works in 2025/26, the role of Form NRL1, and what landlords must do to remain compliant.

Who Counts as a Non-Resident Landlord

HMRC defines a “non-resident landlord” as anyone whose usual place of abode is outside the UK. This includes:

• UK citizens living abroad.

• Foreign nationals who own UK property.

• Companies, trusts, and partnerships based overseas but receiving UK rental income.

Residency for NRLS purposes is about where you normally live, not just your tax residence status.

When Tax Must Be Withheld

By default, rental income is taxed at source:

• Letting agents must deduct basic rate Income Tax (20%) before paying rent to the landlord.

• Tenants must do the same if the annual rent is more than £100 per week and no letting agent is involved.

The tax withheld is then paid to HMRC.

NRL1 Approval: Receiving Rent Without Tax Deducted

Non-resident landlords can apply to HMRC (via Form NRL1 for individuals, or NRL2/NRL3 for companies and trusts) to receive rental income gross (without tax withheld).

To qualify, landlords must:

• Keep UK tax affairs up to date.

• Not have a history of serious tax compliance issues.

Even if granted approval, landlords must still declare rental profits via a Self Assessment return each year.

Ongoing Self Assessment Obligations

Non-resident landlords who receive UK rental income must:

• File an annual Self Assessment return.

• Report rental profits (less allowable expenses).

• Pay any tax due, after crediting any amounts already withheld under NRLS.

Failure to file can result in penalties and potential withdrawal of NRL1 approval.

Compliance Risks for Overseas Landlords

Key risks include:

• Double taxation — if income isn’t reported correctly in both the UK and the landlord’s country of residence.

• Missed deadlines — NRLS reporting and Self Assessment carry strict HMRC timetables.

• Withholding errors — tenants or agents may fail to deduct tax correctly, leading to arrears and HMRC penalties.

How Wexley Supports Non-Resident Landlords

At Wexley & Associates, we help overseas landlords:

• Apply for NRL1 approval and manage ongoing compliance.

• Optimise rental income structures (personal vs company ownership).

• Navigate UK Self Assessment while coordinating with foreign tax obligations.

• Avoid HMRC scrutiny and unnecessary tax leakage.

With our expertise, non-resident landlords can stay fully compliant while maximising their after-tax returns.

Keep Your Overseas Rental Income HMRC-Compliant

Living abroad shouldn’t make UK property ownership a tax burden. With the right support, you can stay compliant, avoid unnecessary deductions, and protect your rental profits.

Contact Wexley & Associates today for expert advice on managing your Non-Resident Landlord obligations.

References

• HMRC: Non-resident landlord scheme – overview

• HMRC: Apply for approval to receive rental income gross (NRL1)

• Related Wex Insider article: CGT on Selling a Buy-to-Let: Rates, Reliefs & the 60-Day Rule