The Non-Resident Landlord Scheme (NRLS): A UK Tax Guide (2026)

The Non-Resident Landlord Scheme (NRLS) is an HMRC regime designed to collect UK tax on the rental income of landlords who have their usual place of abode outside the UK. The scheme places a direct legal obligation on either the letting agent or the tenant to deduct tax from the rent at source and pay it to HMRC.

This guide explains the operational mechanics of the NRLS, the rules for applying to receive rent gross, and the significant impact of the shift to Corporation Tax for non-resident company landlords.

The Core Withholding Obligation

The central purpose of the NRLS is to ensure tax is collected on UK property income, regardless of where the landlord resides. The scheme achieves this by requiring a UK-based person—the letting agent or, in some cases, the tenant—to withhold tax from rental payments.

Role of the Letting Agent

A UK letting agent who manages property for a non-resident landlord must operate the scheme. This duty applies irrespective of the amount of rent collected.

The agent is required to:

1. Deduct tax from the landlord’s UK rental income.
2. Pay this tax to HMRC each quarter.
3. Provide the landlord with an annual certificate (NRL6) showing the total tax deducted.

The definition of a “letting agent” is broad and includes anyone who manages property on behalf of a non-resident landlord.

Role of the Tenant

If a non-resident landlord does not use a UK letting agent, the obligation to deduct tax can fall directly on the tenant.

A tenant must operate the NRLS if:

1. They pay rent directly to a landlord whose usual place of abode is outside the UK; and
2. The rent they pay amounts to more than £100 per week.

If the rent is £100 a week or less, the tenant has no obligation to operate the scheme unless specifically instructed to do so by HMRC.

Applying to Receive Rent Gross

A non-resident landlord does not have to have tax deducted at source. They can apply to HMRC for approval to receive their rental income gross (without any tax deduction).

To do this, the landlord must complete the relevant form (Form NRL1 for individuals, NRL2 for companies, or NRL3 for trustees).

HMRC will typically approve if:

• The landlord’s UK tax affairs are up to date.
• They have never had any UK tax obligations.
• They do not expect to be liable for UK tax for the year in which they apply.

If HMRC approves, it will issue a notice to the letting agent or tenant authorising them to pay the rent without deducting tax. The landlord remains liable for any tax due on their rental income and must declare it via a Self Assessment tax return.

Non-Resident Companies: The Shift to Corporation Tax

A fundamental change took effect from 6 April 2020. Since this date, non-UK resident companies that carry on a UK property business are charged to Corporation Tax on their profits, not Income Tax. This measure was introduced to deliver more equal tax treatment between UK and non-UK resident companies.

This brings non-resident company landlords within the scope of all relevant Corporation Tax rules. Consequently, when a letting agent calculates the tax to withhold under the NRLS for a corporate landlord, they must now consider Corporation Tax principles.

Interaction with the Corporate Interest Restriction (CIR)

The shift to Corporation Tax subjects non-resident company landlords to the Corporate Interest Restriction (CIR) rules. These complex rules can limit the amount of interest and other financing costs a company can deduct when calculating its taxable profit.

This created a significant compliance burden for letting agents, who would need detailed knowledge of the landlord’s wider group to apply the CIR rules correctly when calculating the quarterly tax to withhold.

To address this, the NRLS regulations were amended to provide a simpler, alternative rule. A letting agent can make an irrevocable election to calculate the deductible financing costs for NRLS purposes as:

A fixed allowance of 30% of the UK rental income net of other deductible expenses.

This simplified method allows agents to calculate the required tax withholding without needing to perform a full, complex CIR calculation each quarter. Any shortfall in the landlord’s ultimate Corporation Tax liability must be paid by the company itself.

Transitional provisions ensured that Income Tax losses incurred by a non-resident company before 6 April 2020 could be carried forward and set against future UK property business profits subject to Corporation Tax.

Summary of NRLS Responsibilities

• Can apply to HMRC (Form NRL1/2/3) to receive rent gross.
• Must file a UK tax return to declare income and claim credit for tax withheld. | | Letting Agent | * Must operate the NRLS for all non-resident landlord clients.
• Deduct tax from rent and pay it quarterly to HMRC.
• For corporate landlords, they must consider Corporation Tax rules (including the elective CIR simplification) when calculating tax to withhold.
• Provide an annual certificate of tax deducted to the landlord. | | Tenant | * Must operate the NRLS if they pay over £100/week directly to a non-resident landlord with no UK agent.
• Deduct tax from rent and pay it to HMRC.
• Does not need to operate the scheme if rent is £100/week or less, unless told to by HMRC. |

For detailed operational guidance, refer to HMRC’s Non-Resident Landlord Scheme guidance notes. For specific issues concerning the transition of non-resident companies to the Corporation Tax regime, review the relevant Finance Act 2019 provisions and associated HMRC commentary.