Owning property in England: a detailed overview of tax obligations

Foreign nationals buy property in the UK for a variety of reasons. Some dream of moving to England to do business in one of the largest financial centres in the world. Some when choosing a house or flat are considering options closer to a public school or university, as they go to the United Kingdom to give their children an excellent English education. Finally, British property can be considered by an enterprising foreigner simply as a promising investment. The residential and commercial property market in the British kingdom is showing strong growth.

Whichever of the above is your reason, you will probably be interested to know what tax liabilities you will have after buying a house, flat or plot of land in the UK.

Is there really no property tax in England?

There is a popular misconception that there is no tax on immovable property in the British Isles. It may be true that there is no direct tax on property in Britain. However, does this mean that buying, renting, simply owning, selling or passing on to heirs real estate in the UK will not be accompanied by numerous taxes and fees? Of course not! In various circumstances, the owner of a property in England will still face a tax burden.

What factors affect the amount of tax payments on English property?

We’ve counted 7 reasons and circumstances that can determine the tax burden on a property owner in the UK:

1. Cost of purchase.
2. The presence of a second home for the buyer.
3. Immigration status of the buyer.
4. The location of the property to be purchased.
5. The purpose of buying a property is to invest in a secure asset, business, rental income or to live in the country.
6. How is the property acquired – freehold or long-term lease? Is it registered to yourself or to a controlled company?
7. Cost of Sale.

Let’s make a brief overview of the main taxes and fees that accompany British property owners at different periods.

Stamp Duty Duty Land Tax / SDLT

The first tax a person or company pays when buying a property in England or Northern Ireland. This tax has a progressive rate. The total amount of SDLT depends on the price of the property being purchased. Additional factors that affect the amount of stamp duty include the purpose of the property, whether you are permanently resident in the UK, and whether you have another home.

Standard rate SDLT for UK residents purchasing a home in England and Northern Ireland

SDLT Calculation Example:

Joe has sold his old house in Manchester and is buying a small one-bedroom flat in a good area of inner London for £865,000. How much money will he need to pay stamp duty?

• The first£ 125,000 of the cost of Joe’s London flat is stamp duty free.
• The next£ 125,000 of value is subject to SDLT at a rate of 2%.
• For the remaining £615,000, stamp duty is 5%.

The amount of stamp duty to be paid to Joe is:

£125 000 × 2% + £615 000 × 5% = £2 500 + £30 750 = £33 250

If an English property is purchased through a legal entity, the standard company rate of 17% (for residential properties valued at £500,000 or more) will apply.

Experienced investors consult tax experts when budgeting for the purchase of UK property, as the legislation provides for the possibility of reducing the amount of stamp duty. For example, when you buy several properties at once or when the property being purchased includes land of a certain type.

In which cases does the increased STDL rate apply?

If a UK resident is buying a residential property but already owns a home worth £40,000 or more, 5% will need to be added to the stamp duty rate calculations from the table above.

If the additional property is bought by a company, partnership or trust, Stamp Duty Land Tax will also be higher than the standard 17%.

By decision of the British authorities, foreign nationals purchasing a home in Britain pay stamp duty at an increased rate of 2 per cent.

Annual Tax on Enveloped Dwellings / ATED

If the purchase of a residential property was made through a company, your commercial organisation will have to pay ATED each year – a tax that is assessed on company-owned residential property worth more than £500,000.

This tax is paid by the company in April, usually at the time of filing a tax return. The amount paid is linked to the value of the residential properties owned by the business. In the accounting period from 2025 to 2026, ATED can be between £4,450 and £292,350 per annum.

In order to properly calculate this tax, a business needs to have a revaluation of the property it owns. The Tax Service requires ATED companies to revalue their real estate every 5 years in accordance with ATED legislation.

In some cases the organisation is exempt from paying ATED. Annual tax will not be charged, for example, if an investment dwelling purchased through the company is rented out to third parties unrelated to the owner.

Income Tax / Rental Income Tax

Since we’ve brought up renting out UK property, it’s worth noting that any income arising in the UK is subject to income tax.

If your property in Britain is rented out, you will need to prepare and submit an annual tax return and pay tax on the income you receive, whether you are tax resident in the jurisdiction or not.

The United Kingdom has a progressive income tax scale for individuals and companies. In some cases the tax rate reaches 45%.

But the good news is that the UK authorities treat letting property as a business. This means that you don’t have to include all rental income in your income tax base, as you will have costs just like any other entrepreneur. However, be aware that each year a new list of expenses is published that a landlord can include on their tax return. Be sure to consult a tax expert or a competent accountant before you start deducting your costs from your rental income!

In addition, English tax residents can take advantage of a personal tax allowance in the form of a tax-free amount. In May 2025, this amount is the first £12,570 of declared income.

Capital Gains Tax / Capital Gains Tax / CGT

You will have to pay Capital Gains Tax when you sell your English property. CGT is charged on the difference between the sale proceeds and the money you paid when you bought the property.

The current CGT rate in the country is 24%. Tax residents of the UK must report their income and pay tax no later than 60 days after the completion of the sale and purchase of their immovable property.

Tax residents can take advantage of the relief – the tax-free minimum, which is now £3,000. A tax deduction is also available if an English person sells their main residence.

Ground Rent / Ground Rent

A feature of the British and not only the British property market is the possibility of buying property:

• Freehold – when both the building and the land on which it is built are acquired at the same time.
• Leasehold, where the flat or house to be purchased is situated on land owned by a third party – a so-called landlord.

If an English property is bought on a long lease, the owner of the property will have to pay the landlord for the rent on his land. This is usually a relatively small amount, in the region of £100, but if you are taking out a long lease on an expensive apartment in a prestigious area of London, the amount can be several thousand pounds.

Municipal Tax / Council Tax

This tax is levied by local authorities. It is used to maintain public property and the infrastructure that surrounds property bought in England.

This is probably why council tax should be paid by the occupant. In other words, if you live in your UK house or flat, you pay Council Tax. If you earn money from renting, your tenants will have to register with the local council and pay Council Tax regularly.

The amount of this charge is more often than not dependent on variables such as: the number of occupants ‘counted’, the neighbourhood, the value and type of property. In some regions of the UK, council tax is calculated on an individual basis.

Inheritance tax

People often avoid the sad subject of passing away and unfortunately do not think at all about how to pass on their estate to their heirs without loss. British inheritance tax is a monstrous 40 per cent. In addition to the deceased’s estate, expensive gifts made by the deceased less than 7 years before his or her death are also subject to this tax.

With a well drafted will, additional insurance and tax reduction, you will not be able to reduce your inheritance tax payments, but also prevent conflicts between heirs.

There is an additional advantage to the tax deductions available under UK law. For example, if the estate passes to your spouse, no inheritance tax will be payable. Other relatives can take advantage of the tax-free threshold for posthumous estates, which is now £325,000. And if you pass your home to your children or grandchildren under a will, the non-taxable threshold can be increased to £500,000, provided the property is valued at less than £2m.

After all, your estate can be gifted to your descendants and live in good health for more than 7 more years so that your heirs have no tax liability. An experienced executor is sure to have effective tax planning tools that are right for you!

Conclusion

As you can see, the absence of direct property tax does not exempt UK property owners. And since property in the UK is not cheap, your potential tax liability can be quite large.

Therefore, before buying a house, flat or plot of land in the British Isles, calculate in advance your additional costs for numerous fees and taxes. Better still, get advice from a qualified British tax expert – not only will you be able to predict your expenses, but you will also optimise a substantial part of your taxes!