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Q: I used to live in the UK but have recently moved abroad. I have a residential property in the UK which I let out, a friend has mentioned that I should be receiving the income with tax deducted, is that correct?
A: As a non-resident you remain liable to UK income tax on rental profits arising from a property in the UK. You should therefore register under the Non-Resident Landlords Scheme. The scheme requires the letting agent to deduct basic rate tax (currently 20%) on the amount of rent received less any allowable expenses paid by the letting agent or tenant.
If you do not have a letting agent and the tenant pays you more than £100 per week then the tenant will be required to deduct the tax. The letting agent or tenant is required to account for income tax due on a quarterly basis. They should also complete an annual information form and provide the non-resident landlord with a tax deduction certificate.
It is, however, possible to apply to HMRC to receive the rental income gross. If the application is successful, HMRC advises the letting agent or tenant not to deduct tax from any rental payments and tax is paid via the self assessment system. An application can be made provided the landlords UK Tax affairs are up to date.
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