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Last updated: 25 Aug 2022

The latest tax considerations for owners of UK property

A number of changes over recent years have given rise to a significant increase in compliance requirements (and subsequently tax bills) for owners of UK property. This article provides a brief overview to ensure you stay abreast of the tax obligations you may be facing.

Stamp Duty Land Tax (SDLT)

The following changes are likely to have had an impact if you’re a UK property owner, including if you purchased property through a company, or if you’re non-UK resident.

Stamp Duty Land Tax (SDLT)

From 1 October 2021, SDLT rates and bands reverted to their pre-pandemic rates, meaning that SDLT is payable on all residential property purchases or taxable exchanges for consideration exceeding £125,000.

How much you pay will depend on whether your land or property is for residential or non-residential use and whether your purchase is being made as an individual or via a corporate body.

The maximum rate applicable to you when purchasing a single UK residential property as an individual is currently 12%, provided that after buying the property, it’s the only one you own.

There’s an additional 3% charge if you’re purchasing a second home or purchasing through a corporate body. There’s also an additional surcharge of 2% if you’re non-UK resident, giving a maximum potential rate of 17%.

About the author

Jessica Beere

+44 (0)20 7556 1282
beerej@buzzacott.co.uk
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The following changes are likely to have had an impact if you’re a UK property owner, including if you purchased property through a company, or if you’re non-UK resident.

Stamp Duty Land Tax (SDLT)

How much you pay will depend on whether your land or property is for residential or non-residential use and whether your purchase is being made as an individual or via a corporate body.

The maximum rate applicable to you when purchasing a single UK residential property as an individual is currently 12%, provided that after buying the property, it’s the only one you own.

Residential property disposals

If you’re non-UK resident, since 6 April 2015 you’ve been required to report and pay Capital Gains Tax (CGT) on disposals of UK residential property within 30 days of completion, irrespective of whether you have CGT to pay. From 6 April 2019 the scope of this legislation was widened to include direct and a range of indirect disposals of all UK land and immovable property.

If you’re UK resident, from 6 April 2020 you’ve been required to report sales of residential property within 30 days of completion but only if there is CGT to pay (in contrast to the non-UK resident case). You still have to report the disposal on your Self-Assessment Tax Return.

From 27 October 2021, HMRC extended the original reporting and payment deadline of 30 days to 60 days for any disposals completing after this date.

Rental income

HMRC has been working on a number of digital initiatives that give them the ability to cross check what you report on your Tax Return with organisations, such as the land registration, and information passed along from companies, such as Airbnb. Technology and the sharing of information are continually extending their scope, so please ensure that you’re aware and comfortable that all your income has been disclosed.

Rental expenses

From 6 April 2017, HMRC has slowly been restricting the relief available for mortgage interest paid when calculating taxable property income for individuals. From 6 April 2020, no deduction is available to you for mortgage interest paid when calculating taxable rental profits. Instead, HMRC allow relief for mortgage interest paid as a basic rate (currently 20%) tax credit only.

Companies are not subject to this restriction and can have relief within the corporation tax computation for mortgage interest paid, in order to calculate the overall company taxable profits.

Annual Tax on Enveloped Dwellings (ATED)

ATED imposes a charge on companies (or “non-natural persons”) owning UK residential properties based on the value of the property at pre-determined valuation dates. The ATED charge for the most recent period (2022/23) ranges over bands from £3,800 for properties valued between £500,001 and £1,000,000 at 1 April 2022, to £244,750 for properties valued at over £20million at 1 April 2022.

The valuation date will be 1 April 2022 for the 2023/24 ATED period, with any ATED charges for that period payable between 1 April 2023 and 30 April 2023.

There are certain exemptions from the charge; however, the annual compliance burden still remains for companies exempt from the charge.

What should you do?

Ensuring that you’re up to date with your compliance and tax requirements in this changing environment can be a complicated process. Whether you want to get up to date or are planning a new property purchase, you should seek expert advice to help you get the tax right and avoid any penalties for non-compliance.

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