Self assessment for overseas landlords

If you let out a property in the UK and you are UK non-resident or you are a UK resident that lives abroad for more than 6 months in a year that rents out property, then you will need to pay tax on any rental income you get in the UK. You will be required to a UK Self Assessment tax return. Below are details about Self Assessment.

Key UK tax dates

The tax year in the UK runs from 6th April to 5th April.

If you are due to pay tax then it is due on the 31st January in year 2.

You must notify HMRC if you are required to prepare a Self Assessment tax return by 5th October following the tax year that the income first arises.

UK resident landlords that live abroad

A landlord who lives abroad for more than 6 months of the year must pay tax on any income they get from renting out property in the UK. If the landlord is a company or trustee, the rules about their usual place of abode apply.

The tax is collected using the Non-resident Landlord Scheme.

Payments on account for rental income

If your tax liability for a year exceeds £1000 then you will be required to make two payments on account of year 2 of one half of the year 1 tax liability. These payments on account will need to be paid on 31st January and on 31st July.

If your liability equates to more than the payments on account then the balance is due on 31st January. If your liability less than the payments on account, there will be a refund of the difference along with a small amount of repayment supplement.

What are the penalties for late Self Assessment returns?

On the day your tax return is late you have a penalty of £100. For each day after the first and up to 90 days you incur a penalty of £10 per day. This equates to total penalties of £1,000 if you are three months late.

After the first three months, the penalty is £300 or 5% of the tax due — whichever is the higher.

And at the end of the 4th quarter there is another £300 or 5% of the tax due — whichever is the higher.

What’s the best way of keeping records for Self Assessment?

Until April 2024 there isnt a set way you have to keep records. Keep statements and evidence of rental income and receipts or invoices of any charges paid that can be deducted from the income. You can keep hard copies or scans currently. However, from 2024 the rules will change when Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will be introduced.

Under the requirements of MTD for ITSA, individuals who are subject to income tax on their income and profits of their property business will be required to keep their accounting records electronically (using suitable software) and file quarterly returns to HMRC with details of their income and expenditure together with any other information that HMRC requires.

A final end of period statement will then be submitted after the tax year to complete the individual’s tax submissions.

The frequency of reporting and timing of payments arent currently changing.

How long should I keep records for Self Assessment?

Records of all information used to complete tax returns must be kept for 22 months after the end of the tax year, or for 5 years and 10 months for those carrying on a business or who have income from letting out property. There is a maximum penalty of up to £3,000 for each tax year for which records have not been kept.

Capital Gains Tax (CGT)

Non-residents or residents living abroad for more than 6 months in a year, will still be liable for Capital Gains Tax (CGT) on the sale of residential property in the UK. An online return must be completed and the CGT due will be required to be paid within 60 days of completion of the sale. This is separate from your Self Assessment tax return.

CGT late filing penalties

There is an automatic non-refundable penalty of £100 if the CGT return is not filed by the due date Sometimes, if there is a reasonable excuse, the penalties will be waived. However, we would advise you to pay within the 60 days required.

If the return is more than three months overdue, there is a penalty of £10 for each further day that the return is late up to a maximum of 90 days.

If the return is more than six months late there will be a further penalty of £300 or 5% of the liability if this is higher.

If the return is filed more than twelve months after the filing deadline there will be a further penalty of £300 or 5% of the liability if this is higher in addition to the penalty due for the previous 31st July. In serious cases the penalty may be up to 100% of the tax due.

If you do not pay on time, interest is charges on the amount paid late. There is also a 5% late payment penalty if the liability for the previous tax year is not paid by 1st March following that tax year and a further 5% late payment penalty if it is not paid by the 31st July after that. If the tax is not paid by the following 31st January then there will be a third 5% late payment penalty.

What if you cannot pay your income tax or capital gains tax due?

If you cant pay the tax you owe, then contact HMRC to discuss support available. HMRC may suggest you pay what you owe in instalments. This is called a Time to Pay arrangement.

You or your accountant can contact HMRC directly to arrange a Time to Pay arrangement.

CGT late filing penalties

Overseas resident landlords or UK residents that live abroad for more than 6 months MUST tell HMRC if they have any rental income whether any tax is due or not (on form SA1). Then HMRC will register the landlord for UK taxation and send a tax return to the landlord. To ensure youre fully compliant, complete you Self Assessment tax return correctly and on time and pay your liabilities, seek the help of a specialist landlord accountant like dns accountants to help you meet your tax compliance obligations.

If you want more information about Self Assessment and income tax for overseas landlords, then contact our tax team on 03330 886 686 or e-mail us enquiry@dnsaccountants.co.uk.

About the author

Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning. I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents. I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.