United Kingdom - Tax Overview


A guide to UK tax:

UK property taxes
The Furnished Holiday Lettings Tax laws
UK stamp duty
The UK Non Resident Landlords scheme

Non-residents are liable to pay tax on income received in the UK in addition to paying property related taxes detailed below. An individual is considered tax resident for taxation purposes if they spend 183 days or more in the UK .

The tax year in the UK runs from 6 April to the following 5 April and the return is due by 31 January of the following year.

Non-resident landlords must register with the Non-Resident Landlord Scheme. To avail of the current £6,475 tax free allowance and to receive gross rental income registration must be completed by all non-resident landlords. Certain nationalities such as US and those from the Middle Eastern countries are not eligible to the tax free allowance and will be liable to tax on their full rental income.

Non-Resident Landlords Scheme (NRLS)

The letting agent for the property, or if no agent is acting, the tenant, must deduct basic rate tax (currently 20%) at source and pay this over to the Inland Revenue on behalf of the landlord. Any tax paid to the Inland Revenue on the Landlord’s behalf is held as a tax credit against the Landlord’s final tax liability.

A Landlord can also apply to HMRC to have their rental income received gross and to file an income tax return directly with the UK tax office provided that the total income received is above the tax free allowance. If income received is above the tax free threshold HMRC will register landlord as self-assessed and an annual UK tax return must be filed.

Furnished Holiday Lettings (FHL) properties are treated differently from other properties for tax purposes. These are particularly useful for the astute property investor, as many of the tax benefits that a taxable trade enjoys are applied to such income (without actually being regarded as a trade). These include many allowable expenses, 50% capital allowances on furniture and equipment for year one (25% p.a. thereafter), loss relief against other income and not just rental income, lower 10% UK CGT rate on first £1m gain on disposal (entrepreneur’s relief) also can defer the payment of UK CGT by availing of rollover relief if the proceeds of sale are reinvested within 3 years. There is also a favorable scheme to encourage landlords to make their FHL environmentally friendly.
Landlords wishing to claim such status need to ensure that all properties under the claim qualify and meet all of the conditions.

Taxes to pay when buying a UK property:

UK Land Tax/ Stamp Duty is payable when you purchase land/property. The tax depends on the region and the rates vary from 1% to 4%.

The VAT rate in the UK on the purchase of property will depend on how the process is elected by the buyer/ owner/ seller of the property. VAT is charged at 17.5% and will increase to 20% from January 4th 2011.

Ongoing taxes payable in the UK:

UK Income Tax is payable on UK soured rental income. Rates vary between 20% and 40% and depend on the levels of rents received.

UK Local Property taxes (Council Tax) apply in the UK and the liability falls on the tenant residing in the property. The tax is calculated on a daily basis and varies per region.

Other applicable taxes are as follows:

UK Capital Gains Tax is not payable by non-residents on gains made from the sale of a property if you are not resident/ ordinary resident in the UK which is dependent on the date you left the UK and the periods you were resident in the UK before you left. While you may not be liable to UK CGT you may be liable to CGT in your resident country.
UK Inheritance & Gift Tax Non UK residents are not liable to UK CAT – therefore as an Irish resident individual only Irish CAT at 25% on the actual gift is payable in Ireland – this is subject to usual Irish thresholds.

Worldwide income

Non-Resident property owners may be liable to declare UK rental income as worldwide income within their annual resident tax return.

Property Tax International specialise in the completion and filing of non-resident UK income tax returns. PTI is a registered tax agent with HMRC. A comprehensive accountancy service is provided for self-assessed and self-employed UK tax residents.



The information provided above is intended as a guide only. While Property Tax International Limited makes every effort to ensure that the information contained herein is accurate, we take no responsibility or liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon.
Page added August 2010