The complete guide to UK property tax 

Contents 

• Introduction 
• Buying a property  
• Occupation of the property 
• Renting a property 
• Non-resident landlords 
• Selling a property 
• Summary

This article was updated in September 2025.

Introduction 

The tax implications of owning UK residential property depend on a variety of factors, including how it is held (directly, or via a trust or company) and its use (personal occupation or to generate rental income). This guide outlines the key points which should be considered, from purchase through to disposal. 

Taxes on buying a property 

Purchases of UK property are subject to Stamp Duty Land Tax (SDLT) if situated in England, Wales or Northern Ireland, Land & Buildings Transaction Tax (LBTT) if situated in Scotland and Land Transaction Tax (LTT) in Wales. 

SDLT for Individuals  

SDLT on residential purchases starts at 2% for properties valued at more than £125,000 and increases on a ‘slice’ basis to a maximum of 12%, plus a potential 5% ‘surcharge’ on all rates where an additional property is purchased (unless it is purchased to replace a main residence, or costs less than £40,000). 

HMRC has announced that it intends to consult on the introduction of a 1% surcharge to SDLT rates for UK residential property acquired by non-UK tax residents. 

Relief for first time buyers

First time buyers purchasing a property for up to £500,000 pay no SDLT on the first £300,000 of the purchase price. Worldwide property ownership is taken into account when determining whether an individual is a first-time buyer. In addition, where the property is being acquired jointly, all purchasers must qualify as first time buyers for the relief to be available. 

Additional residential property: 5% SDLT surcharge

Worldwide ownership is taken into account when considering whether a property is an additional residential property, meaning that the 3% surcharge can apply to a first UK property purchase. A similar surcharge applies to LBTT. 

The SDLT surcharge will mainly affect those buying second homes or rental properties as buy-to-let investments, but it may also have an impact on trustees. There is a specific exemption for trustees purchasing a main home on behalf of a life tenant or interest in possession beneficiary (for the purposes of these rules the beneficiary is treated as having acquired the property). This exemption does not extend to discretionary trusts, which are instead treated in the same way as companies (i.e., potentially liable to the surcharge in respect of even a first residential property purchase). 

More detail on this subject can be found in this article – Stamp Duty Land Tax (SDLT): Everything you need to know.

SDLT for companies  

Where a company or other ‘non-natural person’ is used to acquire a property costing more than £500,000, SDLT may be payable at a ‘super rate’ of 15%. Exemptions from this super rate apply, including for certain properties used in a letting or property development business. 

The 5% SDLT, LBTT and LTT surcharges apply (with minor exclusions) to all corporate purchases of residential property where the 15% rate does not apply. 

A note on LBTT and LTT 

LBTT and LTT are both, in broad terms, very similar to SDLT: the regimes are not, however, identical. This guide does not consider the differences, and anyone contemplating a Scottish or Welsh property purchase should ensure that they take appropriate advice. 

Taxes on occupation of the property 

Individuals 

Ownership and occupation of residential property by individuals is relatively straightforward. 

Trustees 

Ownership of residential property by trustees, UK or non-UK resident, is relatively straightforward. If the property is to be occupied rent-free by a beneficiary of a trust, the beneficiary will be in receipt of a trust benefit which could be matched to underlying income and gains in the trust structure, giving rise to a UK tax charge. 

The trustees should also be aware of the potential availability of Principal Private Residence (PPR) relief and ensure that they have exercised their dispositive powers to permit the beneficiary to occupy the property. 

Companies 

The ATED regime applies to companies owning UK residential property which is, broadly speaking, worth more than £500,000. Where the property is occupied by an individual connected with the company, an annual flat rate tax (ATED) is due. For ATED charges applying from April 2018, the rate will be based on the property’s market value at 1 April 2017 or acquisition price if later. The ATED levy currently starts at £3,500 for properties worth £500,000 to £1,000,000 and the top rate of ATED is £220,350 for properties worth £20 million or more. 

Taxes on renting a property 

Individual 

If an individual lets UK residential property they are subject to Income Tax at their marginal tax rates, i.e., up to 45% on the rental profit, regardless of their UK residence status. Deductions are available for revenue expenses, e.g., letting agents’ fees. Relief for mortgage interest is only available at basic rate (20%).  

Properties let as furnished holiday lets are subject to different rules. 

Trustees 

Both UK and non-UK resident trustees are subject to Income Tax at 45% on their rental profit. Deductions are available for revenue expenses, e.g., letting agents’ fees, although a restriction on mortgage interest applies in the same way as to individuals. 

Companies 

A UK resident company is subject to 25% Corporation Tax on net rental profits. 

Deductions are available for revenue expenses, and there is no specific restriction on financing costs as applies to individuals and trusts (although a general corporate interest restriction will apply if the net interest cost exceeds £2 million annually). 

Under current rules, a non-UK resident company will be subject to Income Tax at 20% on its net rental profits. 

If the shareholder/s of the non-UK resident company are UK resident individuals, or a settlor-interested trust where the settlor is UK resident, the underlying UK source income may be attributed to the shareholder/settlor so that additional tax at up to 45% is due (with a credit for the 20% tax paid by the non-UK resident company). 

In general terms, companies may be an appropriate acquisition vehicle for residential properties which are to be let out commercially (where no ATED or related charges should apply). 

Taxes for non-resident landlords 

Non-UK resident landlords (individual, corporate and trustees) are subject to 20% withholding tax on rents received unless an application is made to HM Revenue & Customs (HMRC) under the non-resident landlord scheme for rents to be paid gross. The 20% withholding tax does not discharge the non-resident’s tax liability if they are subject to tax at 45%, rather it is used as a credit against their tax liability. 

Further information can be found here:  

Understanding the UK non-resident landlord scheme: A guide for landlords.

Corporation Tax for non-resident landlords – An explainer.

Ownership of UK residential property: Inheritance Tax 

UK Inheritance Tax (IHT) applies to UK assets which are directly owned, regardless of the residence or domicile status of the owner. IHT is chargeable on death at 40% in relation to assets held at death. IHT also applies to any gifts made within seven years prior to death, although there is a tapering of the IHT rate. 

Where a UK residential property is owned by a non-UK ‘close company’, under these rules, the value of the shares attributable to the UK residential property is within the scope of IHT. Further to this, any loans made to purchase either UK residential property or shares in a non-UK close company, to the extent to which their value is attributable to a loan, to purchase UK residential property, will also be within the scope of IHT. 

Where residential properties are owned through a non-UK company, there are deeming provisions that give an ongoing IHT exposure for two years when the shares are eventually sold. This area is complex, and specific advice should be sought. 

Transfers of UK property into trust attract a 20% IHT charge and the UK assets will broadly be subject to a 6% IHT charge every 10 years, and a prorated 6% IHT charge on any distributions from the trust. Where the settlor of the trust retains an interest in the trust, in addition to these charges the property will remain in their estate for IHT purposes. 

Tax on the sale of property  

Gains from selling UK residential property may be subject to Capital Gains Tax (CGT), Corporation Tax, or Non-Resident Capital Gains Tax (NRCGT). These gains are generally reported on a Self-Assessment Tax return. However, NRCGT must be reported separately within 60 days of disposal, with penalties for late filing. 

The 60-day CGT reporting requirement also applies to UK residents. 

Individuals 

Individuals are liable for CGT on gains from residential property. If selling their only or main home, they may qualify for Principal Private Residence (PPR) relief, exempting the gain. CGT is charged at 18% or 24%, depending on remaining basic rate band. PPR relief includes a 9-month final period exemption. Lettings relief applies only where the owner shares occupancy with a tenant. 

Non-UK residents pay NRCGT at 24% on gains, based on the April 2015 value or later acquisition cost. 

Trustees 

UK resident trustees pay CGT at 24% on residential property gains. Non-resident trustees also pay NRCGT at 24%, using the April 2015 or later acquisition value. PPR relief may apply if a beneficiary occupies the property under the settlement terms. 

Companies 

Both UK and non-UK resident companies pay tax at 25% on residential property gains, based on April 2015 or later values. Anti-avoidance rules may attribute non-resident company gains to shareholders, unless a valid commercial motive is demonstrated. 

Shares and commercial property 

Non-residents must pay CGT on all UK property disposals, including indirect interests (e.g. shares in property-rich companies). Gains on commercial and indirect property are taxed only on the portion accruing from April 2019. Tax rates align with UK-resident equivalents (e.g. 25% for companies). 

Read this article for more detailed guidance: Tax on the sale of UK property. 

Summary 

The choice of holding structure can have a significant impact on tax liabilities from acquisition through to ultimate disposal of UK residential property. It pays to take the time to seek advice to get the tax position established correctly from the beginning.  

Separate considerations apply where a residential property is held for development purposes. These are outside the scope of this guide.