This article is designed to be a brief guide to the taxes that apply to UK property, all in one place.  This is written for the benefit of non-residents of the UK.

There are various taxes that apply with in relation to the ownership of UK property and an overview of each of the main ones is set out below.

I have covered this topic previously but it is time for an update as various rules have changed over the past few years.

Income tax

Any who receives rental income from a property is liable to UK income tax as this is “income arising in the UK”.

UK citizens are eligible for a Personal Allowance and only income above this amount is liable for tax.

This Personal Allowance also applies to citizens of various other countries where an appropriate Dual Taxation Agreement is in place but not to everyone.

For the tax year 2024/25, ending 5^th April 2025, the Personal Allowance is £12,570. It was announced that this would be frozen until 2028.

If a property is jointly owned, then two sets of Personal Allowances can be used in order to reduce the tax payable. The same applies for multiple properties.

Anyone who owns a property in the UK and rents it out should complete the paperwork for the HMRC Non-Resident Landlord Scheme which is an arrangement for taxing the UK rental income of non-resident landlords. Standard practice is for rental income to be deducted at source, but non-residents don’t usually have earned income and it is simpler to receive the rental income gross rather than reclaiming tax.

Once you have registered to received the rent to be paid without the deduction of income tax and you declare the income on your tax return.

Capital Gains Tax

Changes to how Capital Gains Tax (CGT) is levied on UK property took effect in April 2015.

In essence, any property that is not a Principle Private Residence for the full period of ownership is likely to be liable for CGT on sale. If a property is only let for a limited period of no more than nine months and/or becomes your home again you would need to specifically review the liability.

Any property that is not your main residence that is sold after 6^th April 2015 will have a liability to gains from this date, or the date of purchase if later, to the date of sale.

Non-resident individuals will be entitled to the same annual CGT exemption as UK residents.

 

The allowance has reduced in recent years and now stands at just £3,000 per person per tax year.

If a property is jointly owned then two allowances apply.

For gains above the allowances, the rates of tax for capital gains on a property sale are 18% and 24%, depending on your marginal rate, that is the rate of tax applied to any UK income in the relevant tax year and the amount of the gain itself.

Stamp Duty

Stamp Duty is a tax on property purchase and applies across the UK on a sliding scale. The rates announced in the mini-budget on 23rd September 2022 should remain the same until 31st March 2025.

Stamp Duty is the generic term but is strictly Stamp Duty Land Tax (SDLT) in England and Northern Ireland, Land and Buildings Transaction Tax (LBTT) in Scotland and Land Transaction Tax (LTT) in Wales.

The rates and levels are the same in England and Northern Ireland but Wales and Scotland have their own rates.

The standard rates apply to a property that will be your principal private residence – your main home – provided you own no other property, or if the property you are buying is the only one that you have ever owned, with overseas property being taken into consideration.

For example, if you own a property in the UAE and buy your first property in the UK, this will be deemed a second property for the purposes of Stamp Duty calculations.

To be deemed a true first-time buyer, you must not have owned (or part-owned) a property anywhere in the world before, even if it was bought for you, you bought it without a mortgage or inherited it. For any first-time buyer Stamp Duty discounts to apply you must also be buying your home and be tax resident in the UK.

If you already own one property, you will pay a surcharge on a second or subsequent properties.

There is a surcharge of 5% for all UK non-residents in addition to the rates shown in the tables below

Stamp Duty Land Tax in England, Wales and Northern Ireland

Purchase price of property	Rate of Stamp Duty	Buy to Let/ Additional Home Rate
£0 – £250,000	0%	3%
£250,001 – £925,000	5%	8%
£925,001 – £1.5 million	10%	13%
£1.5 million & over	10%	13%

The tax is charged on a progressive basis. For example, a UK resident buying their home in England for £400,000 would pay nothing on the first £250,000 and 5% on £150,000.

Land and Buildings Transaction Tax in Scotland

Purchase price of property	Rate of LBTT	Buy to Let/ Additional Dwelling Rate
£0 – £145,000	0%	6%
£145,001 – £250,000	2%	8%
£250,001 – £325,000	5%	11%
£325,001 – £750,000	10%	16%
Over £750,000	12%	18%

 Land Transaction Tax in Wales

Purchase price of property	Rate of LBTT	Buy to Let/ Additional Dwelling Rate
£0 – £225,000	0%	4% up to £180,000, then 7.5%
£225,001 – £400,000	6%	9%
£400,001 – £750,000	7.5%	11.5%
£750,001 – £1.5 million	10%	14%
Over £1.5 million	12%	16%

 Please note that these tables are not relevant to UK residents buying their first home.

UK tax residents who are buying their first home have an additional exemption but that will not apply to anyone living outside of the UK.

Different rates can apply for land or commercial property

All of my clients will be provided with the correct figures based on their specific circumstances.

 

Furnished Holiday Lets

We expect to see an end of the furnished holiday lettings (FHL) tax regime. This was announced in the last Budget under the Conservative government and the new Labour government has confirmed they will be proceeding with it.

The change will take effect from 6^th April 2025, meaning short-term and long-term lets will be treated the same for tax purposes. Individuals with both FHL and non-FHL properties will no longer need to calculate and report income separately.

My understanding is that the reason behind this is to limit excessive short-term and holiday rentals in local communities that change the feel and economy of a place. Standard short-term lets will still be an option.

 

It is important to have made proper provision for the various costs from outset and to understand ongoing and future tax liabilities.

My clients are provided with information on all tax issues at the start of the process so there are never any surprises. Having all the facts matters

One of the professional services I offer alongside advising on suitable investment property as part of general financial planning is an overview of personal taxation in the UK.

 

If you want to know that your capital gains tax liability would be on the sale, or the potential tax on rental income please get in touch.

For a quick summary of why to buy property in the UK, take a look at this very short clip. It features me talking about why UK property makes sense and why you should talk to us. It’s under three minutes long.

https://www.youtube.com/watch?v=Gy3P3Yn-LnU

For further information on investing in property in the UK please see these articles:

UK property investment. 10 reasons why it makes sense

UK property – latest options

Invest in UK property without a big deposit? Yes, you can!

To arrange a discussion about investing in UK property, taxation, or on any aspect of your personal financial planning, please email me at keren@holbornassets.com

Most meetings take place over Zoom which is great for everyone’s time management and sheer convenience.

I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats in the UAE and wider GCC, and the general consumer, financial and legal information that I provide in The National newspaper, on radio, in other media, and on the Facebook group British Expats Dubai &UAE.

Serious topics, all the facts, friendly conversation.

Please take a look at the other useful articles on this website.

The information in this article is correct at time of writing and is always subject to change. You should not construe any information or other material on this website as legal, tax, investment, financial, or other advice.

Updated 30/10/24 following the UK Budget. See that article for more.