Tax guide for expats and non-residents buying property in UK

It is always best to seek tax advice when buying a residential property in the UK, and to gather as much information as possible. There are Four UK taxes which a buyer should take into considering when purchasing a property in the United Kingdom. These are:

  • Stamp Duty Land Tax
  • Income Tax
  • Capital Gains Tax
  • Inheritance Tax

When you are considering your tax position in the UK, it is important to take into account any other forms of UK income you may have. Each type of income is taxed differently, so it is important to understand how this will impact your overall tax liability.

1. Stamp Duty Land Tax (also known as SDLT is a Transfer Fee)

Stamp Duty Land Tax (SDLT) is a tax that is charged on all residential property purchases in the United Kingdom. The amount of SDLT that you will be liable to pay will depend on the value of the property that you are purchasing.

All residential property purchases in the United Kingdom are subject to Stamp Duty Land Tax, except those which fall below the tax threshold, where certain tax reliefs apply.

To calculate your Stamp Duty liability you can visit the government’s Stamp Duty Calculator by clicking here.

2. Income Tax

All individuals are subject to an income tax on income generated within The United Kingdom. A large number of nationalities are subject to an annual income tax-free threshold of £11,850. This means that individuals with an annual income below this amount will not be required to pay any Income Tax. Rental income is also subject to income tax regardless of whether the investor is a citizen or resident or not. Our partners who can handle leasing and property management can ensure overseas landlord status is maintained to minimize taxes.

3. Capital Gains Tax

If you profit from the sale of a property in the United Kingdom, you will be subject to Capital Gains Tax (CGT). However, there are certain expenses that can be deducted from your profits in order to reduce your tax liability. These expenses may include the cost of improvements made to the property or the fees paid to estate agents and solicitors. In addition, if you have lived in the property for a significant period of time, you may be eligible for a “main residence” exemption, which can further reduce your CGT liability. By taking advantage of these deductions, you can minimize the amount of tax you owe on your property sale.

  • 18% and 28% for individuals (the tax rate depends on the total amount of your taxable income)
  • 20% for companies
  • 28% for trustees

4. Inheritance Tax

Inheritance tax is a tax that is levied on the property of an individual after their death.

The threshold for inheritance tax is £325,000 per parent per child. For married couples’ inheritance tax is generally 40% unless the property is left to a spouse or a UK charity.

Inheritance tax can be a burden for many families, as it can eat up a significant portion of an inheritance. However, there are some steps that can be taken to minimize the amount of inheritance tax that must be paid. For example, making use of trusts and other financial planning strategies can help to reduce the amount of inheritance tax that is owed. Additionally, it is important to keep accurate records of all property and assets, as this will make it easier to determine the value of an estate for tax purposes. By taking these steps, families can help to ensure that they are not unnecessarily burdened by inheritance tax.