Tax Tips: Saving tax on UK property rental income

There is a 20% withholding tax on the rent. If a firm of letting agents looks after your property, they are responsible for paying the withheld income tax to Revenue and Customs. Where there is no letting agent, it is the responsibility of the tenant. The letting agent/tenant has to account for this basic rate tax each quarter.

Where a tenant’s gross rent is less than £100 per week, there is no requirement to deduct tax unless instructed to do so by HMRC. Any tax withheld is allowed as a credit against your eventual UK tax liability calculated on yourself assessment tax return.

Non-residents can also obtain permission to self-assess any UK tax liability. This option avoids the withholding tax and is applied for by using form NRL1 (www.hmrc.gov.uk/cnr/nrl1.pdf). Separate forms must be submitted for jointly held properties.