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The ‘Non-Resident Landlord Scheme’ (NRLS) requires persons who act as ‘representatives’ (agents) for the landlord to deduct basic rate tax from the net rent collected (less expenses paid) unless the agent has authority from HMRC to pay the landlord gross.

The tax is paid on a quarterly basis and an information return is submitted. An annual return must also be submitted by 5 July after each tax year-end and a certificate issued to the landlord confirming tax paid.

Example:
John has been working abroad for eight months and rents out his UK property via a letting agent. The letting agent pays all expenses on his behalf, deducting them from the rent received.

The property is let at £800 per month and the expenses are £250.

The amount of net rental profit John will receive is calculated as being:
£(800 – 250) x 80% = £440

The tax bill is £110 per month (i.e. £(800 – 250) x 20%).