Non-UK Residents and MTD Income Tax

MTD for Non-UK Residents: Foreign Property Income and Deferrals

Last updated: February 2026

If you live outside the UK but earn rental income from UK property, Making Tax Digital for Income Tax applies to you. However, HMRC has granted a temporary deferral for non-UK residents and anyone who files the SA109 residence supplementary pages with their Self Assessment return. This means you will not be required to join MTD before April 2027 at the earliest, even if your qualifying income exceeds £50,000. This article explains who qualifies for the deferral, how qualifying income works for non-residents, and what the abolition of the remittance basis means for overseas landlords with UK property.

Who counts as a non-UK resident for MTD purposes

For MTD Income Tax, your residence status follows the same rules as Self Assessment. If you are not UK tax resident under the Statutory Residence Test, you are a non-UK resident. This includes people who:

• Live abroad permanently and own UK rental property
• Work overseas for most of the tax year but retain UK property investments
• Left the UK and now receive UK rental income from abroad
• Are non-UK resident but file a UK Self Assessment return because they have UK source income

If you file the SA109 supplementary pages (Residence, remittance basis etc.) with your Self Assessment return, HMRC treats you as someone who needs the residence deferral. This covers non-UK residents, individuals subject to split-year treatment, and those claiming relief under a double taxation agreement.

The SA109 deferral: what it means in practice

HMRC confirmed in March 2025 that individuals who expect to file SA109 pages for the 2026/27 tax year will not be required to join MTD before April 2027. This is a one-year deferral from the standard Phase 1 start date of 6 April 2026.

The deferral exists because HMRC needs additional time to incorporate the government’s changes to the taxation of non-UK domiciled individuals into the MTD system. The SA109 form covers complex residence and remittance basis disclosures that the current MTD infrastructure cannot yet handle.

The key points of this deferral are:

• Automatic eligibility: if you filed SA109 pages with your 2024/25 Self Assessment return, HMRC knows you are likely to need them again. You should still contact HMRC (by phone or in writing) to confirm your deferral, as the process mirrors the digital exclusion exemption application.
• Covers all SA109 filers: this is not limited to non-UK residents. It also applies to UK residents who claim split-year treatment or treaty relief — anyone who would ordinarily complete the SA109 schedule.
• Temporary, not permanent: the deferral pushes your MTD start date back by one year. Once HMRC updates its systems, you will be required to comply. The current expectation is that SA109 filers with qualifying income above £50,000 will join MTD from April 2027, aligning with Phase 2.
• Does not affect Self Assessment: you must continue filing your Self Assessment return as normal during the deferral period. MTD is deferred, not your tax obligations.

Qualifying income rules for non-UK residents

Qualifying income under MTD for Income Tax is your combined gross self-employment and UK property income. For non-UK residents, the calculation differs from UK residents in one important way: only UK-source income counts.

If you are non-UK resident, your qualifying income includes:

• UK property income: gross rental income from UK residential or commercial property, before deducting expenses, mortgage interest or management fees
• UK self-employment income: gross income from any self-employment carried on in the UK and declared on your UK Self Assessment return

It does not include:

• Foreign property income (rental income from property outside the UK)
• Foreign self-employment income not declared on your UK return
• Employment income (PAYE)
• Dividends, pensions, or partnership profit shares

This is a meaningful distinction. A UK tax resident who owns rental property in Spain must include that Spanish rental income in their qualifying income total. A non-UK resident with property in Spain and the UK only counts the UK property income. The foreign rental income is irrelevant for the MTD threshold calculation.

The MTD income thresholds

The standard phase-in dates apply to non-UK residents once the SA109 deferral ends:

• 6 April 2026: qualifying income above £50,000 (deferred to April 2027 for SA109 filers)
• 6 April 2027: qualifying income above £30,000
• 6 April 2028: qualifying income of £20,000 or more

Qualifying income is gross income, not profit. If your UK rental property generates £55,000 in gross rent but your allowable expenses total £30,000, your qualifying income is £55,000 and you are within scope.

The Non-Resident Landlord Scheme and MTD

Most non-UK resident landlords are already registered under HMRC’s Non-Resident Landlord Scheme (NRLS). Under this scheme, your letting agent or tenant deducts basic rate tax (20%) from your rent and pays it to HMRC, unless you have applied to receive rent gross using form NRL1.

MTD does not replace the NRLS. The two systems run in parallel:

• The NRLS handles the withholding of tax at source on your rental income
• MTD handles the digital reporting of your income and expenses through quarterly updates
• Your Self Assessment return (and eventually your MTD Final Declaration) is where you calculate your actual tax liability and claim credit for tax already deducted under the NRLS

If you currently receive your UK rent gross under an NRL1 approval, you will still need to report that income through MTD quarterly updates once you are within scope. The gross/net distinction under the NRLS affects cash flow, not your MTD reporting obligations.

The new Foreign Income and Gains regime

From 6 April 2025, the government abolished the remittance basis of taxation for non-UK domiciled individuals and replaced it with a new residence-based Foreign Income and Gains (FIG) regime. This change is directly connected to the MTD deferral for SA109 filers.

Under the old remittance basis, non-domiciled UK residents could choose not to pay UK tax on foreign income and gains unless they brought that money into the UK. The new FIG regime works differently:

• New arrivals: individuals who become UK tax resident after at least 10 consecutive tax years of non-residence can claim the FIG regime for their first four years of UK residence. During this period, they pay no UK tax on foreign income and gains regardless of whether funds are remitted to the UK.
• Existing non-doms: a two-year transitional repatriation facility allows foreign income and gains arising up to 2024/25 to be brought to the UK at a flat 12% tax rate.
• After four years: once the four-year FIG window closes, all worldwide income and gains are taxed on the arising basis, the same as any other UK resident.

For MTD purposes, the FIG regime creates complexity because SA109 disclosures need to capture these new reliefs. HMRC’s MTD system was not designed for this level of residence-related detail, which is why the one-year deferral was introduced. Once HMRC updates the MTD platform to handle FIG claims and SA109-equivalent data, the deferral will end.

If you are a non-UK resident landlord, the FIG regime is less likely to affect you directly — it primarily concerns UK residents who were previously claiming the remittance basis. However, if your residence status changes (for example, you return to the UK after a long period abroad), the FIG regime may apply to your foreign income during your first four years back. Your MTD-compatible software and accountant will need to account for this.

Worked example: non-UK resident with UK rental property

Fatima is a non-UK resident living in Dubai. She owns two buy-to-let flats in Manchester that generate the following gross rental income in 2026/27:

Fatima also earns a salary in Dubai, but this has no bearing on her UK qualifying income because she is non-UK resident and the Dubai income is not declared on her UK Self Assessment return.

Step 1: Qualifying income calculation

Fatima’s qualifying income for MTD is £36,600 (UK property income only). Her expenses of £14,200 (management fees, insurance, repairs) are irrelevant to the threshold — qualifying income is gross, not net.

Step 2: Which phase applies?

At £36,600, Fatima exceeds the £30,000 threshold but falls below £50,000. Under the standard rules, she would join MTD from 6 April 2027 (Phase 2).

Step 3: Does the SA109 deferral help?

Fatima files SA109 pages as a non-UK resident. The SA109 deferral pushes Phase 1 (above £50,000) filers from April 2026 to April 2027. Since Fatima is already in Phase 2 (April 2027), the deferral does not give her additional time. She must join MTD from 6 April 2027.

If Fatima’s gross rental income were £55,000, the SA109 deferral would matter: she would have been in Phase 1 (April 2026) but the deferral pushes her to April 2027 instead.

Step 4: Non-Resident Landlord Scheme interaction

Fatima’s letting agent deducts 20% tax from her rent under the NRLS and pays £7,320 to HMRC during the year. Once Fatima joins MTD, she submits quarterly updates reporting her gross rental income and expenses through her software. Her Final Declaration at the end of the year calculates her actual tax liability and gives her credit for the £7,320 already deducted. If she has overpaid, she receives a refund.

Step 5: Quarterly reporting

From April 2027, Fatima must submit quarterly updates through MTD-compatible software:

• Q1 (6 Apr–5 Jul): gross rent £9,150, expenses £3,550 — submit by 7 August
• Q2 (6 Jul–5 Oct): gross rent £9,150, expenses £3,550 — submit by 7 November
• Q3 (6 Oct–5 Jan): gross rent £9,150, expenses £3,550 — submit by 7 February
• Q4 (6 Jan–5 Apr): gross rent £9,150, expenses £3,550 — submit by 7 May
• Final Declaration: by 31 January 2029

Practical steps for non-UK resident landlords

If you are a non-UK resident with UK property income, take these steps now:

1. Calculate your UK qualifying income. Add up your gross UK rental income across all properties. Only UK property and UK self-employment income count. If you are below £20,000 gross, you are outside MTD scope entirely.
2. Confirm your SA109 deferral. If your qualifying income exceeds £50,000 and you file SA109 pages, contact HMRC by phone or letter to confirm your deferral from the April 2026 start date. Do this before April 2026.
3. Choose MTD-compatible software. Select a provider that supports property income reporting for non-UK residents. You need software that handles the quarterly update cycle and can submit directly to HMRC. Our software guide compares the main options.
4. Coordinate with your letting agent. Ensure your agent can provide quarterly income and expense summaries that align with the MTD reporting periods. If they currently send annual statements, ask them to switch to quarterly.
5. Review your NRLS status. If you receive rent gross under NRL1 approval, your full gross income appears in your bank account and you report it through MTD. If tax is withheld by your agent, you still report gross income in MTD but claim credit for the tax deducted in your Final Declaration.
6. Consider appointing a UK-based accountant. Managing MTD from overseas adds complexity around time zones, HMRC correspondence and software access. A UK accountant with MTD experience can handle quarterly submissions on your behalf as your authorised agent.

Exemptions that may apply

Some non-UK residents may qualify for a full exemption from MTD rather than just a deferral:

• Non-resident foreign entertainers and sportspeople with no other qualifying UK income sources are exempt from MTD for Income Tax
• Digitally excluded individuals who cannot use software or the internet due to age, disability, remoteness or other reasons can apply for exemption
• Those with qualifying income below £20,000 remain outside MTD scope entirely under current legislation

If you think an exemption applies, contact HMRC before your MTD start date. Exemption from MTD does not exempt you from Self Assessment — you must still file your tax return as normal.

Frequently asked questions

Does my foreign rental income count towards the MTD qualifying income threshold?

It depends on your tax residence. If you are UK tax resident, all property income counts, including foreign rentals. If you are non-UK resident, only your UK property income and UK self-employment income count. Foreign property income from overseas is excluded from the qualifying income calculation for non-UK residents.

I am a non-UK resident with UK rental income of £55,000. Do I need to join MTD in April 2026?

Not if you file SA109 residence pages with your Self Assessment return. HMRC has granted a one-year deferral for SA109 filers, pushing the April 2026 start date to April 2027. You should contact HMRC to confirm your deferral before April 2026. Once the deferral ends, you will need to comply from April 2027.

Will the Non-Resident Landlord Scheme change when MTD starts?

No. The NRLS continues to operate alongside MTD. Your letting agent or tenant will still deduct basic rate tax from your rent (unless you have NRL1 approval to receive it gross). MTD adds a quarterly digital reporting requirement on top of the existing NRLS withholding arrangements. You claim credit for NRLS tax deductions in your Final Declaration.

How does the new Foreign Income and Gains regime affect my MTD obligations?

The FIG regime, which replaced the remittance basis from April 2025, primarily affects UK residents who were previously non-domiciled. If you are non-UK resident, it is unlikely to change your MTD position directly. However, if you become UK resident in the future, the FIG regime may apply to your foreign income for up to four years. The complexity of these rules is one reason HMRC deferred MTD for SA109 filers.

Can my UK accountant submit MTD quarterly updates on my behalf from overseas?

Yes. An accountant who is registered as your authorised agent with HMRC can access your MTD account and submit quarterly updates on your behalf. This is the most practical approach for non-UK residents, particularly if you are in a different time zone. You provide your accountant with access to your rental records (or your letting agent sends them the quarterly figures), and they handle the submissions through MTD-compatible software.

Sources

• GOV.UK: Technical note — Modernising the tax system through Making Tax Digital
• GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax
• GOV.UK: Work out your qualifying income for Making Tax Digital for Income Tax
• GOV.UK: What the Non-Resident Landlords Scheme is
• GOV.UK: Changes to the taxation of non-UK domiciled individuals