Non-Resident Landlord and Treaty Relief
Sophie is a UK national who moved to Dubai in 2022 and became non-UK resident under the statutory residence test (she works full-time in Dubai and has no UK ties other than a let property). She owns a flat in Manchester, let to tenants for £24,000 per year gross. The letting agent deducts tax under the Non-Resident Landlord Scheme at 20% on the net rent after allowable expenses of £6,000. Sophie also sold a UK shares portfolio in 2024/25 for £300,000, realising a gain of £80,000; she had acquired the shares in 2010 while UK-resident. She has no other UK income and is not domiciled in the UK (she claims non-dom status? She is non-UK domiciled). She asks whether she can avoid the NRLS deduction and whether the share gain is taxable.
1. Advise on the NRLS and whether Sophie can receive rent gross.
Read the worked answer
Under the Non-Resident Landlord Scheme, the letting agent must deduct basic-rate tax (20%) from the net rent unless HMRC has given approval for gross payment. Sophie can apply to HMRC (form NRL1) for approval to receive rent gross if:
- She is not a UK resident, and
- She has no UK tax arrears and complies with her obligations.
If approved, the agent pays gross and Sophie reports the rental profit via self-assessment (SA100 + SA105) by 31 January following the tax year.
Calculation: Gross £24,000 − expenses £6,000 = £6,000? No - £24,000 − £6,000 = £18,000 net. Tax at 20% = £3,600 deducted by the agent. If she obtains approval, she pays the same tax via self-assessment but retains cash flow. She may also claim the £1,000 property allowance instead of expenses - but expenses of £6,000 exceed it, so claim actual expenses.
Treaty: The UK–UAE double tax treaty allows the UK to tax UK-source property income (Article 6), so no treaty exemption. The NRLS is a collection mechanism, not a separate charge.
2. Is the £80,000 gain on the UK shares taxable for a non-resident?
Read the worked answer
For 2024/25, a non-UK resident is chargeable to UK CGT on disposals of UK land and certain assets, and on shares only if the company is a "UK property-rich company" (more than 75% of gross assets are UK land) - otherwise, disposals of shares by non-residents are generally not within the charge to UK CGT.
Sophie's shares are a general portfolio, not a property-rich company, so the £80,000 gain is not taxable in the UK (assuming the shares are not in a UK property-rich company and she is not temporarily non-resident).
Caveats:
- If she was UK-resident in any of the previous five years and is temporarily non-resident (returning within five years), the gain could be caught on return under the temporary non-residence rules.
- She should check the Dubai tax position - the UAE has no personal income tax, so no relief needed.
- The shares may be subject to UK stamp duty on transfer (0.5%) - already paid on purchase.
Planning: If she intends to return to the UK, time disposals to fall outside the temporary non-residence window, or use the remittance basis if applicable (though the gain is not remitted).
3. What is the interaction with her non-UK domicile status and the remittance basis?
Read the worked answer
Sophie is non-UK domiciled. For 2024/25, if she has been UK-resident for fewer than 15 of the last 20 years, she can claim the remittance basis - but this is only relevant to foreign income and gains. Her UK rental income and UK share gains are UK-source, so the remittance basis does not apply to them.
Key points:
- The remittance basis charge (£30,000/£60,000) applies only if she claims it and has been resident for 7+ of the last 9 years. She has been non-resident since 2022, so likely not relevant.
- Her UK rental income is taxable regardless of domicile.
- The share gain is not taxable because she is non-resident and the shares are not UK property-rich (as above) - domicile is irrelevant to that conclusion.
- If she becomes UK-resident again, the remittance basis may become relevant for her Dubai income.
Compliance: She must still file a UK self-assessment return for the rental income (and possibly the share disposal if within the charge). She should keep records of her residence days and ties to support her SRT position. Consider the statutory residence test's automatic overseas/UK tests and the sufficient ties test.