Property Taxes in the United Kingdom

Nonresident UK property owners are taxed on their properties located in the UK, subject to certain exemptions and reductions given in double tax treaties. Couples and registered same-sex partners may be taxed either jointly or separately.

Income Tax

Route 1: Pay income tax upfront (withholding tax)

Nonresidents usually pay income tax at normal progressive rates, which must be withheld by the tenant or letting agent if there is one. In cases where the landlord does not have a letting agent, and the weekly rent exceeds £100 (€133), the tenant must usually withhold taxes from payments made to a nonresident landlord.

Certain expenses may be deducted from gross rental income, including costs incurred for business purposes and not of a capital nature. However, only expenses incurred by the tenant or letting agents may be deducted. Letting agents and tenants are sent manuals by the Inland Revenue to guide them through the process of taxing the landlord. In the case of vague expenses, the tenant or agent must be "reasonably satisfied" that the expense is legitimate before deducting.

No personal allowances are available to those who choose this route.

Where there isn’t a letting agent, the process could be a considerable burden upon the tenant, and tenants may simply refuse to participate, in which case the landlord may opt for the second route.

Route 2: Receive untaxed income now and pay tax later

A nonresident landlord may opt to receive his rent untaxed and choose to file a tax return instead. He will need to fill in form NRL1 (for individuals) or NRL2 (for companies) or NRL3 (for trustees, from the Centre for Non-Residents). Note that each spouse receives the benefit of allowances.

This option may be rewarding for those nonresidents eligible to claim UK allowances, who include:

  • Commonwealth citizens (including British citizens)
  • Citizens of a state within the European Economic Area (EEA)
  • Present or former employees of the British Crown (including civil servants, members of the armed forces, etc.)
  • UK missionary society employees
  • Civil servants in a territory under the protection of the British Crown
  • Residents of the Isle of Man or Channel Islands
  • Former residents of the UK who live abroad for the sake of their health or the health of a member of their family who lives with them
  • Widows or widowers of an employee of the British Crown
  • Citizens of Bulgaria or Israel
  • Individuals who do not fall within the above categories, but are entitled to claim by virtue of the conditions of a Double Taxation Agreement which the UK may have with their country of residence. Depending on the precise terms of the Agreement concerned, such an individual may be entitled to claim either as a resident national of the other country or merely as a resident of the other country.

Under Route 2, rental income is subject to the following income tax rates:

Income Tax 2024

Taxable Income (£) Tax Rate
Up to 12,570 0%
12,571 - 50,270 20% on band over £12,570
50,271 - 125,140 40% on band over £50,270
Over 125,141 45% on band over £125,140

Capital Gains Tax

Individuals who are not residents in the UK are not liable to capital gains tax on the sale of UK property unless they have been residents in the UK within the past five years.

Capital gains are taxed at progressive rates, from 10% to 20%. The capital gains tax rate of 10% applies to capital gains up to the basic rate threshold and 20% on the capital gains above the basic rate threshold.

Indexation and tapering reliefs have been abolished along with the entire previous income-tax-based CGT system. However, a £40,000 (€53,333) letting relief is available for each taxpayer.

If the house was the principal residence throughout the owner’s period of ownership, no CGT is payable, and proportional reliefs are available.

What does "resident" mean?

An individual is always deemed resident if he is present in the UK for more than 183 days.

UK residents who leave the UK

If an individual is a UK resident, and he goes abroad permanently, he will be treated as remaining resident and ordinarily resident if his visits to the UK average 91 days or more a year.

If an individual leaves the UK to work full-time abroad under a contract of employment, he is treated as not resident and not ordinarily resident if he meets all the following conditions:

  • His absence from the UK and his employment abroad both last for at least a whole tax year
  • During his absence, any visits he makes to the UK total less than 183 days in any tax year, and
  • Average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years)

Regardless of employment, if an individual has left the UK permanently or for at least three years, he will be treated as not resident and not ordinarily resident from the day after the date of his departure providing:

  • His absence from the UK has covered at least a whole tax year, and
  • His visits to the UK since leaving have totaled less than 183 days in any tax year, and
  • Have averaged less than 91 days a tax year.

Corporate Taxation

The standard corporate income tax rate ranges from 19% to 26.5%, levied on income and capital gains earned by companies. This rate applies to companies incorporated in the UK or foreign companies doing business in the UK.

Property Buying and Selling Taxes/Costs

Tax Type Rate
Property Transfer Tax 0.00% - 14.00%
Agent Fee (Buyer) -
Agent Fee (Seller) 2.00% - 3.50% (20% VAT)
Legal Fees 0.50% - 1.00%
Notary Fee 0.10%
Roundtrip Cost 2.60% - 18.60%
Source: Global Property Guide, Deloitte, PWC

Property Taxation

Council Tax

Council tax is a tax set by each locality on UK properties that may be used as dwellings, regardless of whether owned or rented. Fifty percent (50%) of the tax payable is based on the property band (A-H) to which the property belongs. The other 50% depends on the number of persons living in the property. If a person of legal age lives alone in the property, the taxpayer may avail of the Single Person Discount and the second 50% may be reduced to 25%.

Where there is an assured tenancy (the normal case), the tenant pays the tax. However, if there are no tenants, property owners are usually liable for this tax.