About Property Taxes

There are a variety of taxes imposed on UK residential property that you should be aware of before buying and selling and taking expert advice beforehand is essential.

Not only are UK residents liable to pay tax on property, but increasingly foreign nationals seeking to invest in this country are also finding that they have to pay as well.

Stamp Duty Land Tax (SDLT)

SDLT is payable when you buy a property in the UK, whether it’s a house or a flat. The amount you pay will depend on whether you are a first-time buyer, already a property owner and buying your next home, buying a second home or buy to let property, or, an overseas buyer.

The amount you will pay depends on the purchase price. The applicable rate will depend on the value and type of property. The SDLT rates are banded as set out below.

Property or lease premium or transfer valueSDLT rate
Up to 125,000Zero
The next 125,000 (the portion from 125,001 to 250,000)2%
The next 675,000 (the portion from 250,001 to 925,000)5%
The next 575,000 (the portion from 925,001 to 1.5 million)10%
The remaining amount (the portion above 1.5 million)12%

First -Time Buyers

If you are a first-time buyer, you can claim a discount (relief) so you do not pay any tax up to 300,000 and then 5% on the portion from 300,001 to 500,000. You re eligible if you, and anyone else you re buying with, are first-time buyers.

If the price is over 500,000, you follow the rules for people who’ve bought a home before.

Second Home Owners and Buy to Let Investors

If you are buying a second property in the UK, a higher rate of SDLT is payable if you already own and will still own a property anywhere in the world . The additional SDLT is levied at 3 per cent on top of the existing rate and applies to the whole of the purchase price. The higher rate of SDLT applies where the amount paid for a second property or buy-to-let property is 40,000 or more.

There is an SDLT surcharge if an individual purchaser (or their spouse) of UK residential property already owns residential property (anywhere in the world) and will continue to do so following the purchase. The surcharge imposes an additional 3% of the relevant SDLT band. additional 3% may be reclaimed if you sell within 3 years.

Inheritance Tax (IHT)

Inheritance Tax (IHT) is not payable on estates worth less than 325,000. On the portion of the estate over the Nil-Rate Band (NRB) of 325,000 IHT is payable at 40%. There are various reliefs are available which can be claimed against IHT, for example, spouse exemption, transferable NRB from the first spouse to die and the Residence NRB if property is being passed to children or grandchildren. See our article on the Wills, Trust and Probate page.

For non-UK domiciled persons in the UK, IHT is payable on death, and on gifts into trust, on UK assets. UK residential properties held via offshore companies are also caught and are subject to IHT on a shareholder s death.

Non-UK residents owning property in the UK are strongly advised to make a Will in the jurisdiction of where the property is situated (England and Wales) dealing only with their property in this jurisdiction ensuring it goes to the persons they want to inherit and on which the value will be subject to UK taxes, Inheritance Tax.

Capital Gains Tax

Capital Gains Tax (CGT) is not payable on any gain made on a sale of your main residence. As you can only claim this exemption on one property, if you sell a second home or Buy to Let property and you make a gain CGT may be payable. A higher rate tax payer is charged at 28% and a lower rate tax payer is charged at 18% of the gain. Purchase and sale costs are deductible and you have a personal allowance which can be set off against the gain and which can also be carried forward one year if unused.

As a non-UK resident, you don t escape from Capital Gains Tax. Non-resident Capital Gains Tax (NRCGT) has been payable on gains made on a sale or disposal (gift) of all UK residential property since 2015 and on commercial property since April 2019. The same rates apply as with CGT.

Capital Gains Tax (CGT) is not payable on any gain made on a sale of your main residence. As you can only claim this exemption on one property, if you sell a second home or Buy to Let property and you make a gain CGT may be payable. A higher rate tax payer is charged at 28% and a lower rate tax payer is charged at 18% of the gain. Purchase and sale costs are deductible and you have a personal allowance which can be set off against the gain and which can also be carried forward one year if unused.

As a non-UK resident, you don t escape from Capital Gains Tax. Non-resident Capital Gains Tax (NRCGT) has been payable on gains made on a sale or disposal (gift) of all UK residential property since 2015 and on commercial property since April 2019. The same rates apply as with CGT.

Income Tax

Buy to Let landlords, or anyone letting residential property or part of a property in the UK is liable to pay income tax (IT) on the letting income. IT rates of between 0% and 45%, is payable depending on the amount of rental income received. Non-UK resident landlords must declare their rental income to HM Revenue and Customs and file a UK tax return to and pay any income tax.

Owning property can be a complicated business and if you worry you don’t understand your potential liabilities, we are able to provide you with the advice to need.

All initial enquiries are without cost or obligation, so please call us now on 01865 721451 or, email info@challenor-gardiner.co.uk or complete our Free Online Enquiry contact form to discover your bespoke fixed price quotation.