Renting Out Your UK Property While Living in Australia: A Tax Guide (2025/26)

If you're making the move to Australia and plan to keep your UK property and rent it out, there are some important tax considerations on both sides of the world that you'll need to get to grips with. At AUK Tax, we help individuals manage exactly this situation. Below, we've outlined the key UK tax issues that commonly arise for non-resident landlords.

Am I a Non-Resident Landlord?

If you live outside of the UK and rent out a UK property, HMRC will classify you as a non-resident landlord. This classification comes with its own set of rules and obligations, separate from those that apply to UK-based landlords.

How Do I Receive My Rent in Full Without Tax Being Deducted?

By default, if you're a non-resident landlord, your letting agent or tenant is required to deduct basic rate tax (20%) from your rental income before passing it on to you. At the end of the tax year, they will provide a certificate confirming the total tax deducted. For most landlords, having 20% withheld from every rent payment creates an unnecessary cash flow problem - particularly when the actual tax due may be lower, or nil, once allowable expenses are taken into account.

The solution is to apply to HMRC using a Non-Resident Landlord form (NRL1). If approved, HMRC will instruct your letting agent or tenant to pay your rent to you in full, without any deduction. Any tax already withheld earlier in the tax year will be refunded through your next rental statement. You would then settle any tax due directly through your UK Self Assessment tax return. HMRC will only approve an NRL1 application where your tax affairs are in good order - meaning no outstanding returns or unpaid tax liabilities.

What Expenses Can I Deduct Against My Rental Income?

For an expense to be allowable against UK rental income, HMRC requires that it is incurred wholly and exclusively for the purpose of renting out the property. Common deductible expenses include buildings insurance, letting agent fees, and utility bills where these are not recharged to tenants.

One area that catches many landlords out is the distinction between revenue and capital expenditure. Routine maintenance and repairs are generally revenue expenses and are deductible. However, improvements or upgrades - for example, replacing a standard kitchen with a higher-specification one - are likely to be treated as capital expenditure. Capital expenses cannot be offset against rental income, though they may be available to reduce a Capital Gains Tax liability if the property is sold in the future. If you're unsure how a particular expense should be treated, it's worth taking professional advice.

It's also important to be aware that since April 2020, mortgage interest can no longer be deducted directly from rental income. Instead, relief is given as a 20% tax credit based on the mortgage interest paid. For example, if you pay £5,000 in mortgage interest during the year, you would receive a £1,000 credit to offset against your tax liability - rather than reducing your taxable rental income directly. For higher and additional rate taxpayers, this restriction can have a significant impact on the overall tax position.

Will My UK Rental Income Be Taxed in Australia?

This depends on your Australian tax residency status, of which there are three categories: Australian resident, foreign resident, and temporary resident.

If you are classified as a foreign resident or temporary resident for Australian tax purposes, you are generally only required to declare income sourced within Australia. In that case, your UK rental income would not need to be included in your Australian tax return. However, if you are an Australian tax resident, you are subject to tax on your worldwide income - which includes UK rental income. In this situation, the rental income from your UK property must be declared in your Australian tax return. As Australian tax rules differ to those in the UK, it is important to understand what expenses can be claimed against your UK rental income on your Australian Income Tax Return. For example, mortgage interest is fully deductible in Australia. Where you have already paid UK tax on that income, you may be entitled to a foreign income tax offset in Australia to avoid being taxed twice on the same income. For Australian residents with UK property income, the Australia-UK Double Tax Treaty is an important piece of the puzzle, and understanding how it applies to your circumstances is essential.

Am I Entitled to a UK Personal Allowance as an Australian Resident?

As a non-resident of the UK, you are not automatically entitled to the UK personal allowance (£12,570 for the year ended 5 April 2026). However, there are specific circumstances in which it may still be available to you, including if you hold a British passport, are a citizen of a European Economic Area (EEA) country, or have worked for the UK Government at any point during the tax year.

Importantly, under the Double Tax Treaty between the UK and Australia, it is likely that Australian residents will be entitled to claim the UK personal allowance. This means that only rental income exceeding £12,570 would be subject to UK income tax — which can make a considerable difference to the overall liability.

What Are the UK Income Tax Rates on Rental Income?

For the tax year ended 5 April 2026, UK income tax rates on rental income are as follows:

Up to £12,570 (personal allowance) — 0%

£12,571–£50,270 — 20%

£50,271–£125,140 — 40%

Over £125,140 — 45%

Please note: From 6 April 2027, the basic rate of income tax is due to increase by 2%. If you are a non-resident landlord with rental income falling within the basic rate band, this will affect the amount of tax withheld at source and the liability arising through your Self Assessment return. 

How Do I File a UK Tax Return From Australia?

Renting out a UK property as a non-resident automatically brings you within the UK Self Assessment regime, regardless of where you live. You will need to file a UK tax return each year to declare your rental income and calculate any tax due.

The filing deadlines are the same as for UK residents - 31 January following the end of the tax year for online returns, or 31 October for paper returns. For the tax year ended 5 April 2026, the online filing deadline is 31 January 2027. Automatic penalties apply for late submission, so it's important to stay on top of these dates.

One important point for non-residents: you cannot use HMRC's own online filing service to submit your return. Instead, you will need to either post a paper return, use HMRC-recognised commercial software, or work with a tax professional who can file on your behalf.

A Note on Australian Tax Deadlines: For Australian residents with UK rental income, the Australian tax year runs to 30 June 2026. The standard lodgement deadline is 31 October 2026, though if you work with a registered tax agent, this is typically extended to 15 May 2027, subject to ATO lodgement program conditions.

Need Help? Managing tax obligations across two countries is rarely straightforward. At AUK Tax, we specialise in helping individuals with UK and Australian tax matters - whether that's filing your UK Self Assessment return, Australian Income Tax Return, applying for non-resident landlord status, or making sense of how the two systems interact for your specific situation.

Get in touch to arrange a no-obligation introductory call. We'll take the time to understand your circumstances and follow up with a clear fee proposal for any work involved.