PROPERTY TAX CONSIDERATIONS

Understanding What Buyers and Owners Pay Over Time

Now that we’ve covered how property purchases are financed, it’s time to understand what taxes are involved—both during the transaction and throughout ownership. In real estate, taxation isn’t just paperwork; it’s a critical piece of financial planning, especially for investors and overseas buyers.

In this chapter, we’ll explore the taxes most relevant to property buyers, owners, landlords, and sellers in the UK. Let’s start with what you pay when acquiring a home.

Property Purchase

What is Stamp Duty Land Tax Stamp Duty?

Stamp Duty is a tax paid when buying a property or land in the UK above a certain price threshold. The amount varies based on the property's value, location, and whether you're a first-time buyer or purchasing an additional home.

Stamp Duty Land Tax (SDLT) The amount of SDLT you pay depends on several key factors:

• The purchase price of the property

• Whether the property is residential or commercial

• The residency status of the buyer

• Whether the buyer is a first-time buyer or already owns other properties

Stamp Duty is due shortly after the transaction and must be accounted for early in the buying process.

For Main Residences:

• 0% up to £125,000

• 2% between £125,001 and £250,000

• 5% between £250,001 and £925,000

• 10% between £925,001 and £1.5 mln

• 12% more than £1.5 mln

For First-Time Buyers:

• 0% up to £300,000

• 5% between £300,001 and £500,000

• Above £500,000 → First-time buyer relief no longer applies

For additional Home Purchasing:

• 5% up to £125,000

• 7% between £125,001 and £250,000

• 10% between £250,001 and £925,000

• 15% between £925,001 and £1.5 mln

• 17% more than £1.5 mln

Rates for Non-UK Residents

If you are a non-UK resident and are considering investing in UK property, you will face an additional 2% surcharge on top of the standard rates when purchasing residential property in England and Northern Ireland.

To get a better idea of your payments, use a Stamp Duty Land Tax Calculator.

Stamp Duty Examples — April 2025

First-Time Buyer Scenario You purchase a home priced at £350,000 in April 2025. The Stamp Duty Land Tax (SDLT) calculation is as follows:

• 0% on the first £300,000 → £0

• 5% on the remaining £50,000 → £2,500 Total SDLT: £2,500

Additional Property Scenario You purchase a second home priced at £600,000 in April 2025. SDLT is calculated at the higher rate for additional properties:

• 5% on the first £125,000 → £6,250

• 7% on the next £125,000 → £8,750

• 10% on the remaining £350,000 → £35,000 Total SDLT: £50,000

*Please bear in mind that these are general guidelines and your tax situation may vary depending on your individual circumstances. We strongly recommend that you consult a tax advisor regarding your property investment.

Ongoing Ownership Costs

As a property owner, you will have to pay some annual fees and bills, such as:

Annual service charge: This is a fee that covers the maintenance and management of the common areas and facilities of the development. The amount varies depending on the development and the services provided.

Property bills: These include water, electricity, internet and other utilities that you use in your property. If you rent out your property, these bills will be paid by your tenant.

Council tax: This is a local tax that funds public services such as education, health and social care.The amount depends on the value and location of your property. If you rent out your property, this tax will be paid by your tenant.

These costs can vary significantly depending on property type and location, so always clarify with developers or managing agents.

RENTING A PROPERTY

If the property is to be rented out, it is crucial to understand the taxes which need to be paid.

Local residents:

The income tax can range between 20-45% depending on the tax bracket of the individual and whether the property is bought via a limited company or an individual. If the rental income is below the personal allowance, you may not owe tax on the rental income. Deductible expenses can reduce this income tax; these can include letting agent fee, maintenance & repair, property insurance ect.

Non-resident:

Similarly, the income tax can range between 20-45%, however an initial 20% is withheld by the property management and the difference is calculated via HMRC at the end of the tax year. Not every non-resident is eligible for the personal allowance. This is dependent on whether they are a citizen of EEA, resident of a Double Taxation Agreement, or whether they work for the UK government abroad.

SELLING A PROPERTY

When you sell a property in the UK, you may be liable to pay Capital Gains Tax (CGT).

Local residents:

Have an annual exempt amount (£3,000). The profits are taxed at either 18% or 28% dependent on the tax bracket.

Non-resident:

Have an annual exempt amount (£3,000) if they are eligible for Personal allowance. The profits are taxed at either 18% or 28% dependent on the tax bracket.

*Please bear in mind that these are general guidelines and your tax situation may vary depending on your individual circumstances.We strongly recommend that you consult a tax advisor regarding your property investment.

Final Note

Property taxation might seem complex, but it follows a predictable structure. Whether you’re advising clients or making your own investment decisions, understanding what’s taxed—and when—is critical for budgeting smartly and avoiding surprises.

In the next chapter, we’ll explore the legal framework of property purchasing, including what solicitors check, how contracts are exchanged, and how ownership is officially transferred.