25%: that's the non-resident tax withheld at source on gross Canadian rental income. Non-resident landlords can instead elect under section 216 of the Canadian Income Tax Act to be taxed on their net rental income by filing a Canadian return, and the Canada Revenue Agency publishes guide T4144 setting out the steps for the 2025 tax year. The choice matters because electing section 216 allows deductible expenses to be claimed and may produce a refund where tax on net income is lower than the 25% withheld. UK taxpayers must also report foreign property income on HM Revenue & Customs self assessment and consider whether Canadian tax withheld or paid can be credited against UK liabilities.
Because payers must withhold 25% on gross payments, non-resident landlords face a clear practical choice: accept the flat withholding or go to the trouble of electing under section 216 and file a Canadian return to be assessed on net income.
The Canada Revenue Agency, in guide T4144, lays out who may elect under section 216 for the 2025 tax year. The rule covers non-resident individuals and partnerships who were non-resident of Canada for all or part of 2025 and who received rental income from Canadian real or immovable property, received timber royalties from a Canadian timber resource property or timber limit, or disposed of rental property for which capital cost allowance had previously been claimed and therefore generated a CCA recapture on disposal.
T4144 makes two operational points that matter to taxpayers and their agents. First, payers or agents must withhold 25% on gross rental payments and remit that tax to the CRA. The payer must remit the withheld tax on or before the 15th day of the month after the month in which the rental income was paid or credited. Second, the guide defines an agent as a Canadian resident acting on the non-resident's behalf, for example a property manager, and confirms their withholding and remittance responsibilities.
The guide also draws a bright line for business income. The CRA explicitly instructs non-residents who are carrying on a business in Canada not to rely on the section 216 route and instead to follow the separate filing requirements for business income. For disposals of rental property where CCA was claimed previously, a section 216 return will address any resulting recapture, rather than leaving that issue to withholding alone.
Practical choices for non-resident landlords and the UK link
The practical decision facing a non-resident landlord is straightforward in theory and fiddly in practice. Accepting the 25% withholding is administratively simple: the payer withholds and remits, and the non-resident has no immediate Canadian filing obligation under section 216. Electing section 216, by contrast, requires completing a Canadian tax return so allowable expenses, interest, repairs, management fees and CCA claims can be set against rental receipts.
If those deductions reduce taxable net income enough, tax assessed on net income will be lower than the 25% withheld and the taxpayer could receive a refund.
That trade-off is the strongest counter-argument to the 216 route: simplicity versus potential tax savings. The CRA's instructions about agents and the separate business-income regime are part of that counterweight. For some taxpayers, especially those with modest expenses, routine withholding will be the cheaper option once compliance costs and the effort of filing a foreign return are taken into account.
UK taxpayers must layer a second compliance system on top. In the United Kingdom, individuals report untaxed income including foreign property income through HM Revenue & Customs self assessment. HMRC lists common groups that must file self assessment returns: the self-employed, company directors, business partners, landlords, those with foreign income and high earners. For the 2024/25 UK tax year the online self assessment filing deadline was 31 January 2026 and the paper return deadline was 31 October 2025.
On penalties, HMRC applies an automatic £100 penalty for missing the initial filing deadline, with further penalties and interest possible for continued lateness or late payments. UK taxpayers therefore need to weigh not only the Canadian filing cost and possible refund under section 216 but also the domestic reporting burden and timing of any foreign tax credit claims. The available guidance notes that foreign tax paid or withheld in Canada may be credited against UK tax liabilities, a further variable in the arithmetic.
Finally, for disposals of rental property that trigger CCA recapture, the section 216 return is the mechanism through which recapture is reported and taxed. That makes the 216 election relevant even when a property changes hands and the arithmetic shifts from annual rental profits to one-off capital and recapture calculations.
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Weigh the likely refund against the cost of preparing a Canadian return and the automatic £100 UK penalty for late filing. Watch the timing of any Canadian refund against HMRC self assessment deadlines and for updates to CRA guide T4144.
This article was created with AI assistance.
