Living abroad while renting out property back in the UK can be a great move – providing you with a steady income while you enjoy all the benefits of living in a more exotic location. But managing property from another country isn’t without its challenges; you’ll need to be armed with the right information and processes to make the most of it. Here are our tips for UK landlords living overseas.
What are the challenges for overseas UK landlords?
As any landlord will testify, renting out property comes with a fair bit of admin – and there’s a lot to get your head around in terms of tax and regulations. The same is true of renting out properties here in the UK when you live abroad; in fact, things can get a little more complicated. Don’t panic though – with the right information and some careful planning, there’s no reason you can’t run a successful buy-to-let business back home with minimal stress.
First things first, below are some of the challenges you’ll need to prepare for:
Understanding tax for overseas landlords
Even though you live abroad, earning money from a rental property in the UK means you need to pay UK income tax on this.
The government classes you as an overseas landlord if you live outside the UK for six or more months a year. (It doesn’t matter if you own a property in the UK that you class as your ‘main home’. If your ‘usual place of abode’ for at least six months is elsewhere, you’re classed as an overseas landlord – this applies to individuals, as well as companies, trustees, and partnerships).
Here’s where things get a bit more complicated.
As an overseas landlord, the tax you owe on your UK rental income is collected by the Non-resident Landlord Scheme (NRLS). This stipulates that UK letting agents working on behalf of overseas landlords must deduct tax from their client’s rental income by law. It’s important to note that a letting agent can be ‘an estate agent, solicitor, accountant or friend of the landlord’ – according to the government.
So, the tax you owe is not paid directly by you but is collected before your rental income reaches you from your UK letting agent. If you don’t use a letting agent, your tenant is responsible for complying with the NRLS scheme (unless they pay on average less than £100 a week in rent).
Under the NLRS, your letting agent or tenant must account for tax for the periods ending:
- 30 June
- 30 September
- 31 December
- 31 March
What if I don’t want tax to be deducted from my rental income?
It’s possible to apply for an exemption if you don’t want your letting agent or tenant to deduct tax from your rents. To do so, you need to fill out one of the following forms:
- NRL1i – if the applicant is an individual
- NRL2i – if the applicant is a company
- NRL3i – if the applicant is a trustee (including a corporate trustee)
Getting your head around how exactly this all works can be tricky at first, so it’s a good idea to speak to an accountant to make sure you understand everything clearly.
💡 Pro tip: we have a guide on how to choose a great property accountant
Understanding UK regulations as an overseas landlord
Even though you’re living abroad – your activity as a UK landlord is subject to all the same regulations as landlords living in the UK. So you’ll need to keep up to date with these, or employ professionals to do this on your behalf, such as a solicitor and an accountant.
As an example – the UK gov’s Tenant Fees Act 2019 and the Renters Reform Bill 2021 are two pieces of legislation that have significantly changed the way in which private landlords can operate, whether living at home or abroad.
Keeping up to date with the kinds of regulations, as well as changes to tax relief rules, can feel that bit more complex from afar. But it’s crucial you do so to avoid getting into any trouble with the law or HMRC.
Managing your rental properties from a distance
This is potentially one of the biggest areas of concern for newbie overseas landlords. How do you keep everything in check with your UK rental properties when you’re living hundreds or thousands of miles away? How do you find reliable tenants, keep an eye on your property from a maintenance point of view, and market it between tenancies?
The obvious answer is to use a trustworthy property agent (more on this below). But even with someone managing your business on your behalf, it can definitely feel a little daunting to be so far away from things (those who aren’t great at delegating will need to polish up this skill!).
With planning and the right agent, though, you should be able to fall into a steady rhythm and begin to enjoy being a landlord from afar.
Managing rental property from overseas – our tips
Here are our tips for keeping your buy-to-let rental business running smoothly from afar:
Find a reliable letting agent
Finding someone who can oversee your properties on the ground here in the UK is pretty much a no-brainer for overseas landlords. They’ll be able to assist with all aspects of renting out your property – from finding new tenants to collecting rent and sorting out any maintenance issues.
Although this does come at a cost, you’d likely spend much more travelling back and forth if you were to try and handle things alone.
Some tips for finding a reputable letting agent include:
- Make sure they’re a member of/accredited with a reputable body. Propertymark is an excellent place to start.
- Check they’re insured with professional indemnity insurance (it’s also worth asking them what level of cover they have).
- Ask about their experience working with overseas landlords. Some letting agents will only offer a basic set of services, while others will offer a full suite of property management services.
- Familiarise yourself with their process to keep you up-to-date on all compliance matters – for example, keeping a property in line with gas and electrical safety regulations. This is important if you want to be sure your letting agent is equipped to keep everything legal and above board while you’re away.
- Check to see how well they promote the properties they already manage – it’s a good idea to look for a letting agent that uses more than just one marketing channel.
- Read their reviews and testimonials to see what other landlords’ experience of working with them has been.
Make sure you’ve got adequate landlord insurance
When you can’t jump in the car and be at your rental property in minutes, it’s easy to feel a little nervous about the prospect of something going wrong – say, a break-in or burst pipe. Protecting yourself with adequate landlord insurance can help give you greater peace of mind that your investment is safe no matter how far away you are. When shopping around for policies, be sure to check and double-check that the terms cover you as an overseas landlord.
Seek out reliable, long-term tenants
To keep admin and stress to a minimum, ask your letting agent to focus on finding reliable, long-term tenancies for your property, rather than those that are likely to be shorter term lets. This means you can enjoy longer swathes of time without needing to market the property and screen tenants – ideal when you’re living in another country.
Build a reliable network of contractors
Having to scramble for tradespeople is stressful enough when you’re in the same country, let alone when you live abroad. If you prefer the DIY approach, instead of the managed service via a letting agent, building a network of contractors you can trust can be an invaluable move for you as an overseas landlord.
Keep your finger on the pulse of property market trends
As an overseas landlord, it’s a bit easier to lose track of what’s going on back in the UK in terms of rental rates, market demand, and property values. But it’s important to stay up to date to make sure you’re protecting your investment and rental income over time.
Being a landlord in the UK while living abroad – closing thoughts
Managing rental property from another country comes with its own unique set of challenges. But working with a trustworthy letting agent and seeking advice from professionals around tax and regulations can help minimise these stresses. While there might be a few bumps in the road at the start, the more experience you get as an overseas landlord, the smoother things tend to run. And ultimately, it can be a rewarding move for both landlords and the tenants they provide homes for.
Good to know: Hammock helps you keep tabs on income and expenses
If you’re new to the Hammock blog, you might not know that our platform was designed for landlords, by landlords. Use our accounting software to streamline all aspects of buy-to-let bookkeeping – and glean invaluable, real-time insights about your UK properties from wherever you are in the world.
Our guide is for educational purposes only, as we don’t provide tax advice. We always recommend consulting experts (in this case your accountant or tax advisor) when dealing with rules and regulations.