Updating post from Reddit.
Hi all,
I have recently started renting out an apartment via letting agent (this tax year), being a UK resident/national, but just been offered the chance to work abroad. However, I'm not entirely sure what the correct process is, and was hoping that this sub could help answer the following questions:
I was informed in a call by HMRC that my letting agent should have been withholding 20% of the rental income as tax, even though I am currently UK resident. Is this really the case - I thought this was only the case for non-resident landlords?
Given that I am now moving abroad, I am planning to apply to receive the whole income untaxed using NRL1 form. However, what happens to the income I receive during the processing time for the NRL1 - should the letting agent withhold the tax in the mean time? Are there any other things I should be doing now that I am moving abroad?
Slightly tangential, but I have not yet applied for tax self-assessment as I thought I'd have until the end of the tax year. To inform HMRC that I'm moving abroad, would using a P85 form be valid?
Thank you.
breaking it down per question:
1. tax withholding while you are a UK resident
you are correct: your letting agent should not be withholding tax from your rent while you are still a UK resident. the requirement to withhold 20% tax is part of the non-resident landlord scheme (NRLS), and it only applies from the date you are no longer resident in the UK.
2. the NRL1 form process
this part is really important to get right.
any tax that your agent does withhold isn't lost. you will declare it on your self assessment tax return, and it will be used to offset your final tax bill for the year.
3. informing HMRC (p85 vs self assessment)
you are right that you need to tell HMRC you are leaving, but the P85 form is not the correct route for you. the P85 is for people with simple tax affairs (usually just employment income) who won't be filing a tax return. because you now have rental income, you must register for and file a self assessment tax return.
the self assessment is where you officially declare everything. it has sections where you declare your rental income and also sections where you state the date you left the UK (this is on a supplementary page called the sa109 'residence').
actions:
hope this is helpful - good luck with the move!
Hi, thanks for your detailed reply, it is extremely helpful!
One more question - if my agent does not actually collect my rent (i.e. the tenant transfers the balance directly to myself) - do they still qualify as a "letting agent" according to the NRLS scheme?
The HRMC advice appears to suggest not, and as my agent does not currently rent collect for any of their clients/have overseas client, he has not got a HMRC reference number, which the NRL1 form would otherwise require.
HMRC definition of letting agent: https://www.gov.uk/government/publications/non-resident-landord-guidance-notes-for-letting-agents-and-tenants-non-resident-landlords-scheme-guidance-notes/notes-for-letting-agents).
Your agent would need an NRL number - even if he’s just collecting and passing on to you the first month’s rent in a Let-Only situation, which is what you seem to be describing.
Think carefully about whether you can effectively self-manage the property from overseas.
If you stick with self-management, your tenant must register with the non-resident landlord unit, otherwise they must hold back 20% of the rent and pay it over to HMRC.
Thanks for your reply. In this case, he is actually a managing agent, and he has been managing my flat for a few months now. However, all rent is transferred directly from the tenant to myself, and I have never been passed on rent from the tenant via the agent. In this case, would the agent still need a NRL number?
based on what you've described, if your agent manages the property but never handles or receives the rent money on your behalf, they are not considered a 'letting agent' for the purposes of the NRLS.
therefore, your agent does not need an NRL number, and they have no obligation or ability to withhold tax from the rent.
the responsibility doesn't just disappear. it falls onto your tenant as u/Ok_Entry_337 said.
if the rent you receive is over £100 a week, your tenant is legally required to withhold 20% tax from the rent they pay you and send that money to HMRC each quarter. in reality, this is a massive administrative burden to place on a regular tenant, and most would be unable or unwilling to do it.
this makes your plan to submit the nrl1 form even more critical. it is the key to solving this problem for both you and your tenant.
when you apply, you will state that you do not have a letting agent who collects your rent. if HMRC approves your application, they will give you an approval notice. you must then provide a copy of this notice to your tenant. this notice is the tenant's legal permission to pay you the full rent without deducting any tax.
Got it, thank you so much for your explanation and time, I really appreciate it (you have made everything 1000x clearer!)
no problem - glad it was helpful :)