Property Tax

At Stratos, we provide clear, practical advice which is tailored to your specific needs to help you manage all aspects of property taxation.

We make property tax simple and manageable. Whether you’re a landlord, investor, or returning expat, we’ll help you understand exactly what you need to do and how to do it in the most tax-efficient way.

What taxes are applicable to properties?

If you’re buying, selling, or renting out property in the UK, there are several taxes you may need to consider. The rules can vary depending on your circumstances, especially if you’re a non-resident or own more than one property.

The key taxes to be aware of are:

• Stamp Duty Land Tax (“SDLT”) which is payable on the purchase of all residential and commercial properties in England and Northern Ireland (different rules apply to Scotland and Wales). The rates and reliefs applicable depend on your personal circumstances.
• Capital Gains Tax (“CGT”) is payable on the sale of a second property. Generally your main home is exempt from CGT as long as you have always lived in it. You must report the disposal within 60 days to HMRC and pay the associated CGT liability.
• Income tax on rental income applies when you rent out a property and receive income. This is increasing from April 2027 by 2% for all taxpayers.
• Inheritance Tax (“IHT”) is payable on death or when making certain gifts.

Stamp Duty Land Tax

Stamp Duty Land Tax (“SDLT”) applies when purchasing land or property in England and Northern Ireland (different taxes apply in Scotland and Wales). The rates vary depending on the purchase price, the type of property and who is buying it. Higher SDLT rates apply to larger purchases, and there are different bands for residential and commercial properties.

• 5% Surcharge: Companies and individuals with interests in multiple residential properties may face an extra 5% SDLT surcharge.
• Residential vs Commercial: SDLT rates differ for residential and commercial properties.
• Mixed-Use Properties: These includes properties which have both commercial and residential elements e.g. a house above a shop or a residential property with commercial land attached and are typically taxed at the (lower) commercial rates.

Capital Gains Tax

If you sell a UK residential property and make a gain, you may be liable to pay Capital Gains Tax (CGT), even if you’re not a UK resident. Individuals must report the sale to HMRC and pay any CGT due within 60 days of completion. This 60-day deadline applies to both UK and non-UK residents and includes second homes, rental properties, and investment properties.

However, there are several reliefs that can reduce or even eliminate your CGT liability. The most common is Private Residence Relief (PRR), which generally exempts gains on your main home if you have lived there throughout your ownership or meet certain criteria.

Other reliefs, such as Letting Relief and Gift Hold-Over Relief, may also apply depending on your circumstances. Acting promptly to calculate your gain, claim any reliefs, and submit the required return on time is crucial to avoid penalties and minimise your tax payable.

Rental Income

If you’re a landlord earning rental income from either a UK or overseas property, you may need to pay income tax on your profits and report these earnings through a self-assessment tax return.

Please be aware that rental income could result in you becoming a higher rate taxpayer, and therefore subject to higher rates of income tax and also Making Tax Digital additional reporting.

For more information on completing a Self-Assessment Tax Return, visit our page Self-Assessment Tax Returns page.

Non-resident landlord scheme

The non-resident landlord scheme applies to individuals, companies and trusts who are based outside the UK and receive rental income from UK properties.

The non-resident landlord scheme ensures that non-resident landlords meet their UK tax obligations, with specific rules for withholding tax, corporation tax, and VAT, as well as considerations for capital gains on property disposals.

There are a number of practical points to consider which include:

• Tax withholding obligations
• Quarterly reporting and Making Tax Digital
• Annual reporting
• Capital gains tax implications (including higher rates for non-UK residents) and 60 day reporting.

Ensuring you understand your reporting obligations as a non UK resident with UK property is critical to ensure you stay on top of your compliance obligations and therefore avoid penalties and interest charges.

Inheritance Tax

Inheritance Tax may be due on UK property when it forms part of an individual’s estate upon death or when certain lifetime gifts are made. UK residential property is always within scope of IHT, even for non-UK domiciled individuals.

From April 2025, new rules mean that if you’ve been UK resident for 10 out of the last 20 years, you may be liable to IHT on your worldwide assets, including property. Proper planning can help reduce IHT exposure, especially for those owning valuable property portfolios or considering moving abroad.

Incorporation

If you’re growing your rental property portfolio, incorporating your property business into a limited company could offer long-term tax advantages, including potential savings on income tax and increased flexibility for succession planning, but it’s not the right path for everyone.

The incorporation process involves important legal and tax considerations, including Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). In certain circumstances, these taxes can be managed effectively, but expert advice is essential to ensure this is the right route for you, structure the transfer correctly from the outset and understand the tax implications before moving.

Why Incorporate Your Property Business?

Incorporating your property business can provide several key benefits, including:

• Tax Efficiency: Pay corporation tax on rental profits rather than income tax, which could result in lower overall tax rates as tax relief should be available in full on any mortgage interest costs, unlike personal ownership.
• Flexible Succession Planning: Offers greater options for planning more effectively for inheritance or future business ownership transitions.
• Enhanced Growth Potential: More opportunities for reinvestment of profits and business expansion

If your primary aim is to access all the income generated by your property business and withdraw it for personal use, incorporation may not be the most tax-efficient choice for you.

This is because incorporating your business can result in double taxation:

• Corporation tax is paid on the profits your company generates.
• Income tax is then paid on the dividends you withdraw from the company, which could mean you end up paying tax twice on the same income.

For property owners who prefer to access all profits directly, the additional layer of taxation may reduce the overall financial benefit of incorporation.

Sale or Acquisition of Property

Whether you’re buying or selling property, the right tax planning can make a big difference. With the right structure, you can maximise reliefs, reduce tax liabilities, and avoid unexpected costs, especially when dealing with commercial property, where VAT and Capital Allowances are key considerations.

How we can help

• Advise on structuring your sale or purchase for maximum tax efficiency
• Identify and apply any available reliefs or deductions
• Provide expert guidance on VAT and Capital Allowances for commercial property transactions

Why Stratos?

At Stratos, we take the time to understand your goal, whether you’re buying, selling, or holding property. We’ll guide you through the key tax considerations, from Income and Capital Gains Tax, Stamp Duty Land Tax and Capital Allowances to VAT.

In addition to managing immediate tax obligations, we also consider the long-term financial impact of your property decisions. Where appropriate, we’ll provide strategic advice to help you manage your exposure to Inheritance Tax (IHT) and protect your wealth for future generations.

Our advice is practical, clear, and tailored to your circumstances so you can move forward with confidence, knowing your property transactions are structured efficiently and fully compliant.