What is Section 24 and how does it affect non-resident landlords?

Section 24 of the Finance Act 2015 removed the right for individual landlords to deduct mortgage interest as a business expense. Instead, a 20% basic rate tax credit applies on the full mortgage interest amount. For non-resident landlords in higher tax bands (40–45%), this dramatically increases the effective tax rate on leveraged UK property.

Do I need to register with the Non-Resident Landlord scheme?

Yes. If you are a non-resident landlord receiving UK rental income, you must register with HMRC's Non-Resident Landlord (NRL) scheme. Without registration, your tenant or letting agent must deduct 20% tax at source from your gross rent before paying it to you.

Can non-resident landlords use a UK limited company to avoid Section 24?

Yes. A UK limited company is not subject to Section 24 — it can deduct mortgage interest as a business expense against rental income. Corporation Tax is 25% for profits above £250,000 (19% for profits below £50,000). However, extracting profits as dividends adds another layer of tax. This structure favours buy-to-let investors with large portfolios.

What UK Capital Gains Tax applies when non-residents sell UK property?

Non-resident individuals pay UK CGT on UK residential property gains at 18% (basic rate) or 24% (higher rate) from April 2024. They must report the disposal to HMRC within 60 days of completion and pay any tax owed at that point — even before filing a tax return.

Section 24 & Non-Resident Landlords: UK Tax Rules for Expats 2026

Section 24 fundamentally changed the economics of UK buy-to-let for individual landlords — and its impact on non-resident landlords is particularly severe. Combined with the Non-Resident Landlord (NRL) withholding requirements, non-dom rule changes, and the 60-day CGT reporting requirement for property disposals, UK property investment for expats in 2026 demands careful structural planning.

What Is Section 24?

Section 24 of the Finance Act 2015 (phased in fully from 2020) replaced the historic right to deduct mortgage interest from rental income with a 20% basic rate tax credit. This affects only individual landlords — not companies.

The Impact Illustrated

Before Section 24 (pre-2020 regime):

Gross rent: £24,000/year
Mortgage interest: £12,000/year
Taxable profit: £12,000 (after full interest deduction)
Tax at 40%: £4,800
Net after tax: £7,200

Under Section 24 (2026 regime):

Gross rent: £24,000/year
Allowable deductions (no mortgage interest): ~£2,000 (maintenance, insurance, management)
Taxable profit: £22,000
Tax at 40%: £8,800
Less 20% credit on £12,000 interest: -£2,400
Net tax: £6,400
Net after tax: £5,600 (down from £7,200 — a 22% reduction)

For additional-rate (45%) taxpayers, the impact is even more severe.

The Non-Resident Landlord Scheme

If you are habitually resident outside the UK (typically spending fewer than 183 days per year in the UK), you are a non-resident landlord for HMRC purposes, even if you were previously UK-resident.

Default Withholding

Without NRL registration:

Your letting agent must deduct 20% tax from gross rent before paying you.
If you manage the property yourself, your tenant must deduct 20% (if rent exceeds £100/week).

Registering for the NRL Scheme

To receive gross rents without deduction, register with HMRC using form NRL1 (individuals), NRL2 (companies) or NRL3 (trustees). HMRC approves registration and notifies the agent/tenant — but you remain responsible for filing a UK Self Assessment return and paying the correct tax.

NRL registration does not reduce your tax; it simply moves payment from source-deduction to annual self-assessment.

UK Rental Income Tax for Non-Residents

Non-resident landlords with UK rental income pay Income Tax on their UK property profits:

Taxable Income Band (2025/26)	Rate
Up to £12,570 (personal allowance)	0% (note: non-residents may not be entitled to the personal allowance depending on residency and treaty status)
£12,571–£50,270	20%
£50,271–£125,140	40%
Over £125,140	45%

For Section 24 purposes, the mortgage interest credit is 20% of the full mortgage interest amount — regardless of which tax band the landlord falls into.

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Limited Company Strategy for Non-Residents

Many expat landlords with UK property have restructured into UK limited companies to escape Section 24. Key considerations:

Advantages:

Full mortgage interest deductibility against rental profits
Corporation Tax at 25% (£250k+ profits) or 19% (under £50k profits) — lower than higher-rate Income Tax
Retained profits can be reinvested without immediate personal tax

Disadvantages:

Stamp Duty Land Tax surcharge: 3% additional rate applies to ALL residential purchases by companies, not just second homes
ATED (Annual Tax on Enveloped Dwellings): applies to high-value residential property held in companies
Incorporation costs: transferring existing personal properties to a company triggers SDLT and CGT on the transfer
Mortgage availability: fewer buy-to-let mortgage products available for limited companies

For investors building a new portfolio from scratch, the limited company route often makes financial sense. For existing personal portfolios, the transfer costs are usually prohibitive.

Capital Gains Tax on UK Property for Non-Residents

Non-resident individuals selling UK residential property must:

Report the disposal to HMRC within 60 days of completion (using the UK Property Disposal return on the Government Gateway)
Pay any CGT owed within the same 60-day window
Include the disposal in a UK Self Assessment return for the relevant tax year

CGT rates for non-residents on residential property: 18% (basic rate) and 24% (higher rate), determined by the seller's income in the year of disposal. The annual CGT exemption is £3,000 for 2025/26.

Inheritance Tax Considerations

Non-UK domiciled individuals historically benefited from the UK's non-dom inheritance tax regime — UK property was in-scope but foreign assets were not. From April 2025, HMRC has introduced new long-term residence rules affecting IHT exposure. Expats with UK property should review their IHT position, particularly if they have spent more than 10 years in the UK in the last 20.

Conclusion

UK property remains a compelling long-term asset for expat investors — but the tax environment demands structural planning. Section 24 makes leveraged individual ownership increasingly uneconomic for higher-rate taxpayers; the limited company route is worth modelling for new acquisitions. NRL scheme registration is essential to control cash flow. And the 60-day CGT reporting window is a hard deadline that many expats miss at significant cost. Bordex's dashboard models all these factors — Section 24 impact, NRL position, CGT on disposal — so you can assess UK property on a true post-tax basis.