Residential Property Ownership for Non-Resident Landlords: Key Information and Legislative Updates

For many international investors and expats, owning property in the UK offers a valuable asset and potential source of rental income. However, managing property as a non-resident landlord comes with a unique set of considerations. From navigating tax requirements to understanding recent legislative changes, non-resident landlords need to stay informed to manage their investment effectively and remain compliant.

Key Legislative Considerations for Non-Resident Landlords in 2024

1. Capital Gains Tax for Non-Residents

Non-resident landlords are subject to Capital Gains Tax (CGT) on profits from selling UK residential property. The current rate varies between 18% and 28%, depending on whether the gains fall within the basic or higher/additional tax bands.

Recent Update: Since 2019, all non-residents who sell or dispose of a UK property must report and pay any CGT within 30 days of the sale. Late filings can incur penalties, so it's essential to stay on top of this deadline.

2. Non-Resident Landlord (NRL) Scheme

If you’re living abroad for over six months and earning rental income from a UK property, you fall under HMRC’s Non-Resident Landlord Scheme. This scheme requires that tax on rental income be deducted at the source unless an exemption is granted.

Application for Exemption: To avoid paying tax through this scheme, landlords can apply to receive rental income without deductions, provided they stay on top of their UK tax obligations. However, even with this exemption, non-resident landlords are still required to file an annual UK tax return to report their rental earnings.

3. EPC and Minimum Energy Efficiency Standards (MEES)

Energy Performance Certificate (EPC) requirements apply equally to non-resident landlords. As of now, a property must meet an EPC rating of E to be legally rented out. However, anticipated updates to the Minimum Energy Efficiency Standards (MEES) could raise the minimum requirement to a C rating by 2025 for new leases.

Implication: If your property does not meet the necessary standards, you may need to consider upgrades to continue letting it legally. Ensuring energy compliance is critical, as failure to meet these requirements can result in substantial fines and void your ability to let the property.

Tax Considerations for Non-Resident Landlords

While Pride & Property Group does not offer tax advice, here are some essential tax considerations for non-resident landlords:

• Income Tax: Rental income is subject to UK tax, and you may also be liable for tax in your country of residence. It’s advisable to consult with a tax advisor who can guide you through applicable tax treaties that might help avoid double taxation.
• Allowable Expenses: Non-resident landlords can claim many of the same allowable expenses as UK-resident landlords, such as repairs, letting agent fees, and mortgage interest relief.

Practical Tips for Non-Resident Landlords

1. Utilise a Reliable Property Management Service: Working with a proactive property manager, like Pride & Property Group, can help you stay compliant with UK property regulations, communicate with tenants, and ensure your property is well-maintained.
2. Understand Tenancy Law Requirements: The upcoming Renter’s Reform Bill is set to introduce notable changes for landlords across the UK. Staying informed on these updates, including changes to tenant rights and tenancy termination procedures, is crucial for non-resident landlords.
3. Regularly Review Financial Arrangements: Staying on top of mortgage arrangements, insurance policies, and remittance needs helps ensure a smooth experience as a non-resident landlord.

Building a Relationship with Your Tenants and Local Community

Finally, even as a non-resident landlord, building a positive relationship with tenants can increase tenant satisfaction and lengthen tenancies. Working with a trusted property management agency helps bridge this gap, creating a more seamless experience for both you and your tenants.

Final Thought

While owning property in the UK as a non-resident landlord offers many advantages, it’s essential to keep updated with the latest legislative and tax changes. A reputable property management team like Pride & Property Group can offer the support you need to navigate these responsibilities while focusing on what matters most to you.