A Simple Guide for Overseas Landlords
Experience shows that landlords who let properties miles away from their home have particular difficulties keeping on top of what might be happening with their tenants. Landlords who live abroad and let properties in the UK are likely to encounter additional challenges.
Generally, these overseas landlords need to appoint a reliable letting agent or a trusted relative or friend to manage their properties. These plans should be made some months in advance of the landlord's move because it can take time to put all the plans in place. Such an agent will take all the headaches away from an overseas landlord by offering sound advice on how to manage the whole letting process in the most effective manner. When the property is let the tenancy agreement should not contain the overseas address of the landlord. The tenant must have an address in the UK where he/she can serve a notice of leaving on their landlord or the agent.
Whilst the RLA staff are not trained or registered to give tax advice, HM Government websites advise that if a landlord lives abroad for more than 6 months each year they will be classed as a "non- resident landlord" by HMRC even if you are a UK based resident for tax purposes. Needless to say, an overseas landlord will need to pay tax on rental income on a rented property in the UK. A well trained and reliable letting agent will routinely deduct basic rate tax from rent, allowing for any expenses, and give the landlord a certificate at the end of the tax year.
These rules are outlined in the Non Resident Landlord Scheme (NRL) which operates for rental income paid on or after 6th April 1996. The NRL scheme is operated by the HMRC's Centre for Non Residents (CNR). Non-resident landlords can apply to the CNR for approval to receive their rental income gross, ie., with no tax deducted. If the application is successful, the CNR will issue a notice and the agent will not be required to deduct tax.
It should be borne in mind that an overseas landlord is still required to ensure that the deposit is protected correctly, the prescribed information is given to the tenant and anyone who has paid the deposit so they can sign it, electrical and gas safety checks are done, an Energy Performance Certificate (EPC) is in place and the requisite smoke alarms and carbon monoxide detectors are in place. In England they should also provide the most up to date copy of 'How to rent: a checklist for renting in England' at the start of their tenancy.
A few other points to bear in mind:
The landlord should also, as a matter of routine, inform both their insurance company and mortgage provider of their plans. In the event the landlord wants vacant possession, he would start the process by serving the tenant with a Notice Requiring Possession (eg. section 21 or section 8). An agent, relative or friend can do this on his behalf but a solicitor would need to be appointed to apply to the County Court for the possession order.
A landlord living abroad will not be able to take advantage of the RLA's preferred deposit protection scheme, DepositGuard.