Our guide on tax on rent for overseas landlords explains the Non-Resident Landlord Scheme: the agent deducts basic-rate tax unless HMRC approves gross payment, and the landlord files a return. This is the next layer: what goes on the return, the mortgage interest rule since 2020, which expenses count, the deadlines, and the quarterly digital reporting that from April 2026 applies to landlords with UK property income above £50,000, which includes most Gulf owners of a London flat.
Tax
Running the tax on a let London flat from abroad: interest relief, allowable expenses, the return and Making Tax Digital
How tax on a let London flat works for overseas landlords
A Gulf owner letting a London flat pays tax on the profit at 20 per cent up to £50,270 and 40 per cent above, with no personal allowance for most Gulf nationals. Mortgage interest is not deducted; a 20 per cent credit on the interest reduces the tax instead. The return is due online by 31 January, through commercial software. From 6 April 2026, property income above £50,000 brings quarterly digital reporting under Making Tax Digital, with the first deadline on 7 August 2026. A £4,500-a-month flat is over the threshold.
The scheme is withholding; the return is the tax. A landlord approved for gross payment receives the full rent and pays the tax on the return; a landlord not approved has 20 per cent of the rent (less the agent’s expenses) deducted and reconciled on the return, with a refund if too much was taken. Either way the return is due, the profit is computed the same way, and the tax is at 20 per cent on profit up to £50,270 and 40 per cent above (45 per cent above £125,140), with no personal allowance for most Gulf nationals. The return is the document; the scheme is a cash-flow arrangement.
Mortgage interest relief for landlords: the Section 24 20 per cent credit
Since April 2020 an individual landlord cannot deduct mortgage or finance interest from rent. Instead, the tax is computed on the profit before interest and reduced by a credit of 20 per cent of the interest (the “Section 24” rule, after the Finance Act section that introduced it). For a landlord taxed at 20 per cent the effect is nearly the same as a deduction; for a landlord whose profit before interest pushes them into 40 per cent, the credit is worth half the deduction would have been, and the tax is higher than the arithmetic of rent minus costs suggests.
What the 20 per cent interest credit covers
The credit applies to interest on borrowing used for the property business up to the property’s value when first let, as our guide on remortgaging explains; it applies to the rental element of Islamic finance in the same way. A company landlord deducts interest in full, which is the one clear tax advantage of the company structure our company guide describes.
Allowable expenses you can deduct from London rental income
Deductible in full from rent: the letting agent’s fees and VAT; service charge and ground rent; buildings and contents insurance; repairs and maintenance that restore the property (redecoration, a replacement boiler like for like, fixing a roof); safety certificates, inventories and inspections; legal and accountancy fees for the letting (not the purchase); council tax, utilities and licence fees paid by the landlord during voids; advertising and referencing; the cost of replacing furniture, appliances and furnishings in a furnished let (the replacement-of-domestic-items relief, which covers the like-for-like cost, not an upgrade); travel to inspect the property, with care and records; and bank charges on the rental account.
The firm’s rule: if the cost keeps the property as it was and let, it is an expense.
Costs you cannot deduct from rental income
Against rent: the purchase price and the costs of buying (stamp duty, the solicitor on purchase, the survey), which are capital and go against capital gains tax on sale; improvements that add value (an extension, a new kitchen where there was none, a loft conversion), likewise capital; the capital element of finance repayments; the landlord’s own time; the cost of travel to London for the family’s holiday on which the flat was visited; the initial furnishing of a flat let furnished for the first time (the replacement relief applies to replacements only); and depreciation.
Repair or improvement: where HMRC draws the line
The line between a repair and an improvement is the one HMRC argues about, and the agent’s invoices should describe the work as what it is.
Self assessment tax return for non-resident landlords: deadlines and forms
The tax year runs 6 April to 5 April; the return is due online by 31 January after the year’s end, with the tax; a non-resident landlord files the SA100 with the UK property pages (SA105) and the residence pages (SA109), online through commercial software (HMRC’s own online service does not accept the residence pages). First-year registration is by 5 October after the first tax year with rental income.
Payments on account, late filing penalties and accountant costs
Payments on account are due 31 January and 31 July where the previous year’s tax exceeded £1,000 and less than 80 per cent was deducted at source, which for a landlord approved for gross payment means paying next year’s tax in two instalments in advance. Late filing is a £100 penalty on day one and rises; late payment carries interest at base rate plus 4 per cent. A UK accountant handles all of this for £400 to £900 a year for one flat; the firm introduces one.
Making Tax Digital for non-resident landlords: thresholds and start dates
From 6 April 2026, a landlord with gross property income (plus any self-employment income) above £50,000 in the 2024/25 tax year must keep digital records and send HMRC a quarterly summary of income and expenses through compatible software, then a final declaration in place of the return; the threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Non-resident landlords with UK property income are within it. A £4,000-a-month flat is £48,000 a year, just under the first threshold; a £4,500 flat, or two flats, is over it.
Making Tax Digital quarterly deadlines for landlords
The four quarterly submissions are due a month and a week after each quarter end (7 August, 7 November, 7 February, 7 May), and the agent’s monthly statements, if in a compatible format, are the digital record. A landlord in the Gulf should have the agent and the accountant agree the software in the spring, because the first quarter’s deadline is 7 August 2026 for those already in.
Which rental records to keep for HMRC and for how long
Keep for at least five years after the 31 January filing deadline: every agent statement, every invoice, the tenancy agreements, the deposit certificates, the NRL certificates of tax deducted, the finance statements showing interest, the insurance schedules, the council tax and utility bills for voids, and the purchase completion statement (for the eventual gain). Digital copies in a folder the accountant can reach. A landlord asked by HMRC for the evidence of a £6,000 repairs figure, and unable to produce it, pays the tax on it.
A worked tax year for a £4,000-a-month flat
The arithmetic for a £4,000-a-month flat with £300,000 of finance, 2026/27:
A worked tax year on a £4,000-a-month flat, 2026/27
| Flat let at £4,000 a month, owned personally, £300,000 of finance at 5 per cent, 2026/27 | £ |
|---|---|
| Rent | 48,000 |
| Agent 14 per cent plus VAT | (8,064) |
| Service charge and ground rent | (6,200) |
| Insurance, certificates, inventory | (1,100) |
| Repairs and replacement of items | (2,400) |
| Accountant | (600) |
| Profit before interest | 29,636 |
| Tax at 20 per cent (no personal allowance) | 5,927 |
| Less 20 per cent credit on £15,000 of interest | (3,000) |
| Tax due | 2,927 |
| Net cash after interest and tax | 11,709, about 2.9 per cent on a £400,000 equity stake |
Source: GOV.UK guidance on rental income and finance cost relief; firm’s calculation, October 2026.
If the agent deducted 20 per cent under the scheme during the year (about £6,900 on the rent net of its own expenses), the return produces a refund of the difference; our guide on London rental yields by area shows the same arithmetic without the finance.
Sources: Work out your rental income when you let property (GOV.UK) · Restricting finance cost relief for individual landlords (GOV.UK) · Making Tax Digital for Income Tax (GOV.UK) · Self Assessment deadlines (GOV.UK). Checked against GOV.UK on 14 October 2026: the finance cost restriction for individual landlords, allowable property expenses and the replacement of domestic items relief, self-assessment deadlines and penalties, and the Making Tax Digital for Income Tax thresholds and start dates. Tax rates are 2026/27. General information, not tax advice; a UK accountant should prepare the return. Figures verified 14 October 2026.
Frequently Asked
Questions about tax on a let London flat
Only the cost of a trip whose purpose is the property business, with records; a family holiday on which the flat was visited is not deductible, and HMRC knows the difference.
From April 2026 if your UK property income in 2024/25 was above £50,000; from April 2027 above £30,000; from April 2028 above £20,000. Most Gulf owners of one central London flat will be in by 2028.
No. It is a cost of acquisition and reduces the gain when you sell, as our guide on selling as a non-resident explains.
20 per cent on profit up to £50,270 and 40 per cent above, with 45 per cent above £125,140, and no personal allowance for most Gulf nationals. The profit is computed the same way whether or not the agent deducted tax under the Non-Resident Landlord Scheme; the return reconciles it, with a refund if too much was taken.
Not since April 2020. The tax is computed on the profit before interest and reduced by a credit of 20 per cent of the interest, the Section 24 rule. For a landlord taxed at 20 per cent the effect is nearly the same as a deduction; for one pushed into 40 per cent, the credit is worth half what the deduction would have been. A company landlord deducts interest in full.
Yes. The 20 per cent credit applies to the rental element of Islamic finance in the same way as to mortgage interest. It covers interest on borrowing used for the property business up to the property’s value when first let, as our guide on remortgaging explains.
A like-for-like replacement that restores the property is a repair and deductible; a new kitchen where there was none is an improvement, capital, and goes against capital gains tax on sale. The line between a repair and an improvement is the one HMRC argues about, and the agent’s invoices should describe the work as what it is.
Online by 31 January after the tax year ends on 5 April, with the tax. A non-resident files the SA100 with the SA105 property pages and the SA109 residence pages through commercial software, since HMRC’s own online service does not accept the residence pages. First-year registration is by 5 October after the first tax year with rental income. Late filing is a £100 penalty on day one and rises.
Instalments of next year’s tax due 31 January and 31 July where the previous year’s tax exceeded £1,000 and less than 80 per cent was deducted at source. For a landlord approved for gross payment that means paying the following year’s tax in two instalments in advance. Late payment carries interest at base rate plus 4 per cent.
£400 to £900 a year for one flat, and the firm introduces one. Records must be kept for at least five years after the 31 January filing deadline: every agent statement and invoice, the tenancy agreements, the NRL certificates, the finance statements showing interest, and the purchase completion statement for the eventual gain.
