Property taxes in the UK 

Buying a home in the UK attracts several taxes at once: stamp duty on the transaction itself, an annual charge if the property is held through a company, capital gains tax on sale, council tax, and inheritance tax when the property passes on. There are not many of them, but together they move the return on an investment by tens of per cent, and several depend not on the property but on the status of the buyer. Below are the rates, thresholds and deadlines in force for the 2026/27 tax year, and the lawful ways to reduce the bill.

Which taxes a UK property owner pays

The tax burden on property in the United Kingdom falls into three groups: a one-off tax on the transaction, annual charges for holding the asset, and the taxes that arise on the way out — a sale or a transfer on death. In almost every group the rate turns on three variables: the buyer’s tax residence, whether they already own residential property, and who is named as owner — an individual or a company.

One important point about geography: there is no single UK-wide transaction tax. Stamp duty applies only in England and Northern Ireland. Scotland moved to its own tax on 1 April 2015 and Wales on 1 April 2018, and the rates there differ. The differences are set out in a separate section below.

Stamp duty on property purchases in England and Northern Ireland

Stamp Duty Land Tax (SDLT) is charged on a sliced basis: each rate applies only to the portion of the price falling within its band, not to the whole consideration. The return must be filed with HMRC and the tax paid within 14 days of completion — one of the shortest deadlines in the UK tax system, and in practice normally handled by the solicitor running the transaction. The current bands have applied since 1 April 2025, when the temporarily raised thresholds came to an end.

The rate depends on whether this is the buyer’s only home, whether they are UK resident for SDLT purposes, and whether the purchaser is an individual. The full tables are published on the GOV.UK stamp duty rates page.

The surcharge for additional dwellings rose from 3 to 5 percentage points for transactions completing on or after 31 October 2024. It applies where, at completion, the buyer already holds an interest in residential property anywhere in the world — including properties outside the UK. This is where overseas buyers most often come unstuck: a flat back home that nobody asked about directly adds five per cent of the entire purchase price to the bill.

Non-residents buying an additional property

The non-resident surcharge is 2 percentage points and stacks on top of the additional dwellings surcharge. For SDLT purposes a buyer is non-resident if they spent fewer than 183 days in the UK during the relevant 12 months. The combined table for a non-resident who already owns residential property is:

The non-resident surcharge can be reclaimed if the buyer accumulates 183 days of presence in the UK within the 12 months following the transaction and applies for a refund within the time limit. It is one of those reliefs buyers tend to discover only after the tax has been paid.

Example of a stamp duty calculation

Suppose a buyer has lived in the UK for five years, is UK resident, owns no other property and is buying a house for £860,000. The calculation runs band by band:

• the first £125,000 falls in the nil-rate band, so no tax;
• the next £125,000 (the portion from £125,001 to £250,000) is taxed at 2%, which is £2,500;
• the remaining £610,000 (the portion from £250,001 to £860,000) is taxed at 5%, which is £30,500.

The total stamp duty is therefore £33,000. Had the same buyer been non-resident, 2 percentage points would have been added to each rate and the bill would have risen to £50,200. And had they also owned a flat in another country, it would have reached £76,200 — almost 2.3 times the original figure, for the same property at the same price.

Buying through a company

Where residential property worth more than £500,000 is acquired by a company, a partnership with a corporate member or a collective investment scheme, a flat rate of 17% applies to the whole consideration, with no banding. The rate rose from 15% for transactions completing on or after 31 October 2024. For a non-resident company it is 19%.

There are ways out of this. Where the property is acquired for letting to third parties on a commercial basis, for resale by a property developer or trader, to house employees, or as part of social housing provision, the flat rate does not apply and the additional dwellings table is used instead. Entitlement to such a relief has to be established before the transaction: stamp duty cannot be recalculated after the event because the structure turned out to be wrong.

First-time buyers’ relief

Buyers who have never owned residential property anywhere in the world can claim a nil rate on the first £300,000 and 5% on the portion from £300,001 to £500,000. Where the price exceeds £500,000 the relief is lost entirely and the whole purchase is taxed at standard rates. These thresholds returned on 1 April 2025.

The point to take from this section is that the gap between the best and worst outcome on stamp duty alone runs to tens of thousands of pounds, and every variable that drives it is fixed on the date of completion.

Annual Tax on Enveloped Dwellings (ATED)

ATED is an annual charge paid by companies, partnerships with a corporate member and collective investment schemes that own UK residential property worth more than £500,000. It was designed as a barrier to holding expensive homes through structures, and the amount depends solely on the value of the property, not on any income it produces. The detailed rules are set out in the GOV.UK guidance on ATED.

The chargeable period does not follow the calendar year: it runs from 1 April to 31 March. The return is filed and the tax paid by 30 April within that period — that is, in advance, for a year that has not yet ended. For a property acquired mid-period the deadline is different: 30 days from the date of acquisition.

The charges are uprated annually: for 2026/27 they rose by 3.8% on the previous year. The band is determined not by the purchase price but by the value of the property at the revaluation date. The valuation currently in use is 1 April 2022, and it applies to the chargeable periods from 2023/24 through to 2027/28; for properties bought after that date, the acquisition price is the starting point.

The point that saves owners tens of thousands of pounds is that ATED does not catch every company with a home on its balance sheet. Relief is available in nine categories, and the most common by far is letting the property to third parties on a commercial basis. The list also covers developers’ and traders’ stock, properties open to the public for at least 28 days a year, employee accommodation, farmhouses and social housing. But relief does not apply automatically: a separate relief declaration return has to be filed to the same deadline. A company letting out a flat that has filed nothing is technically in breach of the deadline, even where no tax is ultimately due.

From here the tax logic changes. Everything above concerns what is paid to get in and to hold the asset. The next two taxes arise on the way out, and this is where an owner usually has more room to plan.

Advantages of professional tax support on a property transaction

• Assessment of the tax consequences before contracts are exchanged
• Choice of ownership structure allowing for resale and succession plans
• Stamp duty calculation covering every applicable surcharge and relief
• Preparation and filing of ATED returns within the statutory deadlines
• Support with the capital gains tax return on a disposal
• Review of entitlement to reliefs under each applicable tax
• Correspondence with HMRC on queries raised against returns

Capital gains tax on a property sale

Capital Gains Tax (CGT) is charged not on the sale price but on the difference between the sale price and the purchase price, reduced by transaction costs and capital improvements. One change here has been widely missed: the higher 28% rate on residential property was abolished on 6 April 2024. The rates for residential and non-residential assets are now identical. Current figures are published in the GOV.UK guide to CGT rates and allowances.

Each individual has an annual exempt amount of £3,000, and most trustees £1,500. Trustees and personal representatives pay a single rate of 24%.

The reporting deadline for residential property is 60 days from completion, not the 30 days that applied before 27 October 2021. The report and the payment both go through the separate Capital Gains Tax on UK property account, without waiting for the annual return. The clock starts at completion, not at exchange of contracts — dates that can be months apart.

The rule is stricter for non-residents, and it is a regular source of penalties. A non-resident must report every disposal of UK property, residential and commercial alike, even where no tax is due: the gain is nil, covered by a relief or the annual exempt amount, or a loss has been made. A UK resident in the same position files nothing; a non-resident files every time, and also within 60 days.

Private residence relief

A sale of an only or main residence is exempt provided the property was the seller’s main home throughout the period of ownership, the grounds do not exceed 0.5 hectare (5,000 square metres) including the site of the house, and no part of the home was used exclusively for business. The final 9 months of ownership always qualify, whatever the property was used for in that time — which allows an owner who has already moved to sell the old home without a charge. For disabled people and those living in a care home the period is 36 months.

Example of a capital gains tax calculation

A non-resident investor bought a flat for £600,000, spent £40,000 on refurbishment and sold it six years later for £790,000. Legal fees and agents’ commission across both transactions came to £20,000. The taxable gain is £790,000 − £600,000 − £40,000 − £20,000 = £130,000, less the £3,000 annual exempt amount, giving £127,000. With no other UK income, part of the gain falls at 18% and the balance at 24%. The report and payment are due within 60 days of completion.

Council tax and the surcharge on high-value homes

Council tax is generally paid by whoever lives in the property rather than by the owner: where a home is let, the tenant is normally the liable person. The amount depends on the property’s band and on the rate set by the individual local authority. Bands in England are still keyed to open-market value as at 1 April 1991 — there has been no general revaluation since 1993, one of the more striking anomalies in the UK tax system.

Band D is the reference point: every other band is fixed in statute as a proportion of it. Band H costs exactly twice band D and three times band A. The average band D charge in England for 2026/27 is £2,392, up 4.9% on the previous year. People living alone qualify for a 25% discount, and households consisting only of students are exempt altogether.

Owners of second homes should note two premium mechanisms. Since 1 April 2025 councils in England may charge a premium of up to 100% on furnished properties with no resident — in effect doubling the bill on a second home. For long-term empty properties the premiums go further: up to 100% after one year, up to 200% after five years and up to 300% after ten. Both are discretionary: each council decides whether to adopt them and at what level, and must give at least a year’s notice before introducing the second homes premium.

The surcharge on homes worth more than £2 million from April 2028

The Budget of 26 November 2025 announced a new annual High Value Council Tax Surcharge on expensive residential property in England. It differs from council tax itself in two fundamental ways: the owner will be liable rather than the occupier, and the receipts will go to central government rather than the local authority.

Valuations will be carried out by the Valuation Office on 2026 values, with revaluations every five years and the next one in 2033. On the government’s own estimate the surcharge will affect fewer than 1% of residential properties in England. Exemptions are under discussion for purpose-built student accommodation, Ministry of Defence property, registered social housing and new build not yet sold by the developer, along with a deferral of payment until sale for owners on a low income.

One material caveat: as things stand this is announced policy, not law in force. The consultation on how the surcharge would work closed on 14 July 2026, the government response has not been published and no Bill has been introduced. The thresholds and amounts in the table above reflect the stated intention and may change before legislation. Further detail is in the official publication on the High Value Council Tax Surcharge. For owners of homes worth more than £2 million it is nonetheless a reason to factor the future charge into a purchase decision now.

Tax support

End-to-end support on the tax side of UK property

Transaction structuring

Comparison of personal ownership, a company and a trust, costed for each option.

Stamp duty calculation and filing

Identifying applicable surcharges and reliefs, filing within the 14-day deadline.

ATED compliance

Assessing the band, reviewing entitlement to relief, filing by 30 April.

Sale and succession

The 60-day capital gains return and planning the transfer to the next generation.

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Inheritance tax and passing property on

Inheritance Tax (IHT) is charged at 40% on the value of an estate above the nil-rate threshold. Where at least 10% of the net estate is left to charity the rate falls to 36%. The general rules are set out on the GOV.UK inheritance tax pages.

There are two thresholds and they add together. The basic nil-rate band is £325,000. On top of that sits a residence nil-rate band of £175,000 for a home passing to direct descendants — children, grandchildren and those treated as such. Together that gives up to £500,000 per person. Any unused portion of both bands transfers to a surviving spouse or civil partner, so a married couple leaving a home to their children can reach £1,000,000. All three figures are frozen until 5 April 2031.

There is also a restriction: the £175,000 residence band is reduced by £1 for every £2 by which the estate exceeds £2 million. It disappears entirely at around £2.35 million — precisely the range in which a substantial share of UK property owners sit.

What changed for non-residents on 6 April 2025

From 6 April 2025 the concept of domicile was removed from inheritance tax and replaced by a long-term residence test. Worldwide assets now fall within the charge for anyone who has been UK tax resident for at least 10 of the previous 20 tax years. Everyone else is taxed on UK assets only.

For property owners the conclusion the reform did not change is the important one: UK property is always within the scope of inheritance tax, whatever the owner’s residence or domicile. Nor does holding it through an offshore company help — since 2017 the shares in such a company have fallen within the IHT net to the extent their value derives from UK residential property. The idea of buying a house through an offshore vehicle to take it outside the inheritance tax net stopped working almost a decade ago, but it still comes up.

Gifting property and the seven-year rule

A gift falls out of the estate if the donor survives it by seven years. Where death occurs sooner and the gift exceeded the nil-rate band, taper relief reduces the rate:

This is where the most common planning mistake sits. Simply transferring the house to the children and carrying on living in it is not enough: the law treats that as a gift with reservation of benefit, and the property returns to the estate at its value on the date of death, with taper relief unavailable — the seven years pass to no effect. To avoid this the former owner must pay the new owner a full market rent and meet their share of the running costs, with the rent kept under review as the market moves. A separate exception applies where an undivided share of a home is given away and donor and donee live there together and share the outgoings.

Inheritance tax must be paid by the end of the sixth month after death, with interest running thereafter. Property qualifies for an instalment option: the tax can be paid in ten annual instalments, although the whole outstanding balance falls due as soon as the property is sold. It is also worth bearing in mind that from April 2027 unused pension funds come within the inheritance tax net — which changes the calculation of what the heirs will use to settle the bill.

These taxes are more closely connected than they look: choosing a company reduces one burden and creates two new ones, and a decision to gift a home changes the calculation under two taxes at once. So what is worth checking is not each tax in isolation but the underlying facts that drive all of them together.

Scotland, Wales and Northern Ireland: how the transaction tax differs

The last item on that list deserves a section of its own. Buyers regularly apply the “UK stamp duty rates” they found online to a property in Edinburgh or Cardiff, and end up tens of thousands of pounds out, because the tax there has a different name, different bands and a different authority behind it.

Scotland: Land and Buildings Transaction Tax

LBTT has applied in Scotland since 1 April 2015 and is administered by Revenue Scotland. The Additional Dwelling Supplement rose to 8% for transactions from 5 December 2024 — the highest second-home surcharge anywhere in the UK. First-time buyers pay nothing on the first £175,000. The return and payment are due within 30 days of the effective date. Current tables are on the Revenue Scotland website.

Wales: Land Transaction Tax

LTT has applied in Wales since 1 April 2018 under the Welsh Revenue Authority. It has the highest nil-rate threshold for a main home in the UK at £225,000, but no first-time buyers’ relief at all. The higher rates for additional properties rose on 11 December 2024. The return and payment are due within 30 days of completion. The tables are published by the Welsh Government.

Northern Ireland was not part of the devolution: the same stamp duty applies there as in England, with the same bands and the same 14-day deadline. Capital gains tax, inheritance tax and ATED operate identically across all four parts of the UK — only the transaction taxes and the local charges diverge.

Personal ownership or a company: choosing a structure

“Should I buy in my own name or through a company?” comes up more often than any other question in consultations, and there is no universal answer. A company brings advantages with a large portfolio and plans to reinvest, but it creates two tax charges an individual never faces and forfeits the single biggest relief — the exemption on a main residence.

As a practical guide: for an only home the owner lives in, personal ownership is almost always better, because main residence relief on sale outweighs any saving from a structure. For a portfolio of let properties the picture shifts — ATED relief for commercial letting comes into play, and the difference between 17% and the additional dwellings table becomes decisive. For commercial property the arithmetic is different again: ATED does not apply, the transaction tax follows its own bands, and a corporate structure is usually preferable.

One change that has not yet taken effect is worth building into the model now, because it will affect any let property: from 6 April 2027 separate income tax rates apply to property income — 22%, 42% and 47% depending on the band. Anyone choosing a structure today with a ten-year horizon should allow for it.

How the tax side of a transaction is handled

Tax support on a UK property purchase is not a single consultation but a sequence of stages running from the first conversation through to the compliance obligations of later years. The typical client journey is set out below; the timings are indicative, since several steps depend on the speed of the other side, the lender and government bodies.

Practical examples from client work

Theory and practice diverge in one respect: real situations almost never involve a single tax. Three typical scenarios are set out below, together with what proves decisive in each.

• An overseas professional buying a first home after several years in the UK. The key question is whether 183 days of presence have accrued by the completion date, since that determines whether the 2-point non-resident surcharge applies. Where the buyer is a few weeks short of the threshold, moving the completion date is sometimes more sensible than paying the surcharge and reclaiming it later. That was the position in this account of tax planning for a foreign buyer moving to England.
• An investor assembling a portfolio of let properties. Here what matters is not the entry rate but the combination of ATED relief for commercial letting and the property income tax rates arriving in 2027. The calculation is done across the whole portfolio at once rather than property by property, because the ownership structure is chosen only once.
• An investor entering the UK commercial property market. ATED does not apply, the transaction tax follows its own bands, and a corporate structure usually wins. This is the route taken in the account of investing in new UK property for passive income.

The difference between a good and a bad outcome almost always arises months before the return is filed — when the structure is settled and the completion date is fixed. Below are real client stories in which the tax side of the purchase was decided in exactly that way.

Client stories on UK property taxes

Success stories

5 min

Tax planning for a foreign person when moving and buying a property in England

Pablo is originally from South America. He has been living in Britain for several years. His business involves supplying construction equipment to...

Success stories

7 min

Property purchase and Buy-to-Let investment in London for a Portuguese couple

Miguel and Sofia are amazing people. They are open, friendly and strive for complete professional and personal fulfilment. We met them a few years ago...

Success stories

6 min

Investing in new UK property

Michael is a good example of determination. Many years ago, he moved to the UK. He completed language courses, started his own small business, and actively familiarised himself with the culture and traditions of the country. He legally formalised his...

Success stories

5 min

Tax planning in England for a client with an investor visa

Andy is a long-standing client of Imperial & Legal. We helped him to obtain a UK investor visa and settle in London. He is originally from South Africa, but he changes locations quite often to...

One of these clients described their starting position in terms many overseas buyers would recognise: the home was needed, but the tax side of the transaction was opaque.

When I first came to the UK for work, I thought it was just for a couple of months. But a couple of years later, we had rented a whole house as a family and realised that we were not going to go anywhere for a while. It became clear that we needed to buy our own place. But I was confused by the tax issues involved in property transactions, given that I am not a British citizen. So, I decided to enlist the support of professionals and turned to Imperial & Legal.

Pablo, 36 years old

A businessman from Chile

Clients’ names and photos have been changed

Key takeaways

• Stamp duty in England and Northern Ireland is charged in slices: 0% to 12% for an only home, plus 5 percentage points for an additional dwelling and 2 points for non-resident status.
• A purchase of a home worth more than £500,000 by a company is charged at a flat 17% on the whole price unless one of the reliefs applies.
• The transaction tax return is due within 14 days in England and Northern Ireland and 30 days in Scotland and Wales.
• ATED for 2026/27 runs from £4,600 to £303,450, with the return or relief declaration due by 30 April.
• Capital gains tax is 18% or 24%; the 28% higher rate is abolished, the residential reporting deadline is 60 days, and non-residents must report every disposal even where there is no gain.
• UK property is always within the inheritance tax net, whatever the owner’s residence and whether or not it is held through an offshore structure.
• Gifting a home while continuing to live in it does not remove it from the estate unless a full market rent is paid.
• Rates in Scotland and Wales differ from the English ones, including the 8% second-home surcharge in Scotland.

There are not many tax traps in UK property, but almost all of them spring on the completion date rather than when the return is filed, and almost all turn on the buyer’s circumstances rather than the property: where they pay tax, what they already own, and what they intend to do with the asset. The rules also change regularly — in the last two years alone the additional dwellings surcharge, the corporate rate, the capital gains rates and the whole logic of inheritance tax for non-residents have all moved, with further changes already announced for 2027 and 2028. The material above is general information and does not replace individual advice: a calculation for a specific transaction is worth doing on current figures and on your own facts.