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Property taxes in UK

Simple guide to taxes related to buying, selling, renting or inheriting real estate in UK and how to minimise your property tax burden.

Every year, foreign investors that want to move to the UK and invest in a stable economy are looking to buy a property here. And of course, their main question is whether they have to pay any tax on it. There are not that many taxes related to real estate in the UK; however, they can be of great importance when deciding on buying and investing into real estate.

Our specialists at Imperial & Legal are happy to plan your taxation in real estate deals and minimise tax burden. If you buy a flat or a house for yourself or buy to let, or buy to gain, we can organise your deal in the most efficient way. Below you will find main property-related taxes in the UK, and for each we can advise how to minimise the bill.

Stamp Duty Land Tax

A buyer must pay SDLT when buying a property in the UK. Rates vary based on its value and legal status of a buyer; it’s a fixed 15% for legal entities. There are certain reliefs and exemptions from the SDLT. For example, you can claim relief when you purchase multiple dwellings. Or, if you buy a land with a house, some types of land that can be part of your area are exempt.

You’ll usually have to pay 3% on top of the normal stamp duty rates when buying an additional residential property if you already own another one anywhere in the world.

Annual Tax on Enveloped Dwellings

ATED is an annual charge payable mainly by companies that own UK residential property. Returns have to be submitted, and payments must be made during April each year for the coming period from 1 April till 31 March. The amount of the tax you’ll need to pay is worked out using a banding system based on the value of real estate on the purchase date or for every 5 years after the acquisition. If a property is let, the company can claim a relief, but it needs to prepare and submit a tax return on letting proceeds.

Capital Gains Tax (CGT)

It’s not strictly a real estate tax, but in most cases you will have to pay it when disposing of a property with a gain. It’s 18% and 28% on your gains from residential dwellings depending on the size of your gain. If you are a UK tax resident, the CGT is paid as part of your annual tax return, and if not, within 30 days from disposal of the asset.

According to new rules since 1 April 2017, companies owning residential property also need to pay the ATED. There are certain exemptions as with every other tax. For example, if you have lived in it for some time, you can reduce the amount payable.

Council Tax

It must be paid to a local council by any household i.e. any type of real estate, a flat or a house. The money is used to maintain the surrounding area. The rate depends on the valuation band of your property and is calculated in a complex way for every home individually.

Some households, e.g. full-time students don’t have to pay Council Tax. You can also get a discount on a property in repairs or on an empty home.

Inheritance Tax

Similar to the CGT, IHT is not a real estate tax in its direct sense, but in most cases, you will have to pay it when dealing with a property. It’s 40% of its value on the owner’s death. A spouse of a diseased person doesn’t have to pay this tax, but all other beneficiaries are liable to the full-rate charge. The transfer of title is only possible after the tax bill is paid, and it’s often the case when you have to sell a property in order to pay the bill.

In 2017, a new measure was introduced offering an additional nil-rate band when a residence is passed on death to a direct descendant. It only applies to an estate, including a main residence, and does not apply to real estate owned by the diseased but never used by them to live there, e.g. let out property.

Our experts have experience and knowledge to advise you on property-related taxes currently applicable in England and help you minimise tax burden when you buy, sell, rent, lease or inherit real estate. We practice case-by-case approach, deal with every client individually which benefit both us and the client. We constantly keep track of all the changes in legal and taxation systems and know about any new taxes or amended rates.

All you need to do is call us or send a message via an online form and we come back to you as soon as possible. We will assign you a personal manager that will deal with all your concerns and issues.

Not sure what property tax you might need to pay?

Our experts have experience and knowledge to advise you on property-related taxes in UK and help you minimise tax burden when you buy, sell, rent, lease or inherit real estate.

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