Answered: The Most Common Property Tax Questions in the UK
- Omar Aswat
- Feb 27, 2025
- 6 min read
Updated: Dec 22, 2025
Navigating property taxes in the UK can be complex. Whether you're buying, selling, renting, or gifting property, it's important to understand the tax implications. Below, we answer some of the most common property tax questions to help you make informed decisions.
Table of Contents
What is Stamp Duty, and How Much Will I Pay?
Stamp Duty Land Tax (SDLT), or simply Stamp Duty, is a tax you pay when buying property in the UK. The rate depends on the property value and whether it's residential or commercial. For residential properties, the tax is tiered, with rates starting at 0% for properties up to £250,000 (£125,000 from April 2025) and gradually increasing for more expensive properties. For example, you pay 5% on property values between £250,001 and £925,000 and 10% on values up to £1.5m.
First-time buyers may benefit from a stamp duty exemption on properties up to £425,000 (£300,000 from April 2025), or a reduced rate for properties worth between £425,001 and £625,000 (£300,001 and £500,000 from April 2025). If you're buying a second home, an additional 3% (5% from April 2025) surcharge may apply.
What is Private Residence Relief?
Private Residence Relief (PRR) is a tax relief that can exempt the sale of your main home from Capital Gains Tax (CGT). If you sell a property that has been your primary residence throughout the period of ownership, you won’t have to pay CGT on any profit you make, provided you meet the eligibility criteria.
Even if you’ve rented part of your property or used it for business, you can still qualify for PRR, although your relief may be reduced. The exemption also extends to the last nine months of ownership, even if you weren’t living in the property during that time.
What is Capital Gains Tax (CGT) on Property?
Capital Gains Tax (CGT) is a tax on the profit you make from selling property or other assets that have increased in value. For second homes, buy-to-let properties, or properties that are not your main residence, you will be liable for CGT on the capital gain (profit) made when you sell.
The rate of CGT depends on your income tax band:
18% for basic-rate taxpayers
24% for higher and additional-rate taxpayers
However, if you qualify for Private Residence Relief (PRR), CGT can be significantly reduced or eliminated when selling your main home.
Are Property Taxes Different in Scotland, Wales, and Northern Ireland?
Yes, property taxes differ in each of the four UK countries:
Scotland: Instead of SDLT, you’ll pay Land and Buildings Transaction Tax (LBTT). Rates start at 0% for properties up to £145,000 and increase progressively for higher values.
Wales: Land Transaction Tax (LTT) replaces SDLT, with rates starting at 0% for properties up to £180,000 and going up to 7.5% for properties over £2 million.
Northern Ireland: Stamp Duty applies here, just like in England.
Although Council Tax applies across the UK, rates and bands may differ between local councils.
What Are the Tax Implications Associated with Gifted Property?
When you gift property, there can be Inheritance Tax (IHT) implications. If the property is worth more than the IHT threshold of £325,000, it could be subject to IHT if you pass away within seven years of making the gift. Gifts made within seven years of death are considered part of your estate.
Capital Gains Tax (CGT) may also apply if you gift property that has increased in value since you acquired it. If you sell the property for less than its market value, CGT may be calculated based on the market value at the time of the gift, not the price you sold it for.
Do I Have to Pay Property Taxes If I’m Renting?
As a tenant, you're generally not liable for property taxes like Stamp Duty or Capital Gains Tax. However, you are typically responsible for Council Tax, which is a local tax paid to your local council. The amount depends on your property's value and location.
In some cases, landlords may include Council Tax as part of the rent. It's crucial to clarify with your landlord whether you're responsible for this cost.
How is Rental Income Taxed?
Rental income is taxed as part of your total income. If you rent out property, you must report your rental income on your Self-Assessment tax return. The income is added to your other earnings, and you’ll pay tax based on your income tax band.
You can deduct allowable expenses from your rental income before calculating tax. These expenses include:
Mortgage interest (although new restrictions limit this for individual landlords)
Property management fees
Maintenance and repairs (excluding capital improvements)
After expenses, the remaining income is taxable. Rates are based on your total income:
20% for basic-rate taxpayers
40% for higher-rate taxpayers
45% for additional-rate taxpayers
Should I Run My Rental Business Through a Limited Company?
Running a rental business through a limited company can be advantageous for some landlords. The Corporation Tax rate on profits is currently 19%, which is often lower than the income tax rate for higher-rate taxpayers (40%). Additionally, profits retained in the company are subject to lower taxes than if paid out as personal income.
However, there are drawbacks. Stamp duty on purchases made by a limited company is higher, and Capital Gains Tax may apply when selling the property, rather than the more favourable CGT rates for individuals. Plus, managing a limited company involves more administration and legal responsibilities.
When deciding whether to run your rental business through a limited company or as a private landlord, it’s important to consider all factors. For a more detailed comparison, check out our full post on Limited Company vs. Personal Ownership.
What is the Non-Resident Landlord (NRL) Scheme?
The Non-Resident Landlord (NRL) Scheme applies to landlords living outside the UK. Under the scheme, your letting agent or tenant must deduct tax from your rent at the basic rate (currently 20%) before sending you the remainder of the rent.
You can apply to HMRC for approval to receive rent without tax deductions, but you'll still need to file a Self-Assessment tax return to report your rental income.
Can Rental Losses Be Carried Forward?
Yes, if your rental property incurs a loss in one tax year, you can carry that loss forward to offset future rental profits. This can reduce your future tax liabilities, meaning you won’t pay tax on profits until those losses are fully offset. It's important to keep records of your losses for future tax returns.
Should You Go Straight to HMRC for Tax Advice?
While HMRC provides helpful information on tax laws, it’s generally not the best source for personalised tax advice. HMRC is responsible for enforcing tax laws and ensuring compliance, but their advice might not be as detailed or tailored as that of a qualified tax adviser.
If your situation is complex or involves multiple properties, consulting a tax professional or accountant can help you navigate the system, maximise allowable deductions, and minimise your tax liabilities. For expert guidance, consider reaching out to ASWATAX our team can offer tailored advice to ensure you’re making the most of available tax reliefs and reducing your overall liabilities.
Conclusion
Understanding property taxes in the UK is crucial for managing your financial obligations whether you're buying, selling, renting, or gifting property. By staying informed about tax laws and seeking expert advice, you can make smart decisions that save you money and reduce your tax liabilities.
Have more questions about property taxes? Feel free to get in touch and we’ll be happy to help!
Meet Omar
Omar is a Chartered Tax Advisor (a.k.a an expert on tax issues) and founder of ASWATAX. He regularly shares his knowledge and best advice here in his blog and on other channels such as LinkedIn.
Book a call today to learn more about what Omar and ASWATAX can do for you.
*Disclaimer: ASWATAX is a firm of Chartered Tax Advisors, and we strive to provide accurate, up-to-date tax insights. Tax laws may change, so this content is for general guidance only and not a substitute for professional advice. Seek independent tax and legal counsel before making decisions. ASWATAX is not liable for any loss from reliance on this information. Use at your own risk.
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