How to pay property tax in the UK? – here’s how.

Investing in property takes a lot of forethought and planning. It may be a rose-tinted dream to invest in real estate or create a property portfolio, but the important details you have to consider before going for that is the availability of what you can invest, the goal you want to achieve, the risks and consequences, and how you create your portfolio. On top of that, the tax imposed on properties and the tax on property income.

Whether you are a resident of the United Kingdom or not, property income tax is something everyone has to pay if you have owned, currently living, or rented property. And if you choose the route of building a portfolio through the landlord route, you need to know the tax implications and how it works. Whether you are a newbie to the world of tax or have been paying them for some time – here are some of the taxes imposed on properties by the UK government.

  • Stamp duty Land tax (SDLT) – This tax is payable on purchase of property. Of course, the amount is decided in regards to the value and nature of the property. If you buy a property in the UK and own a house somewhere else around the world, there is an extra tax charge known as ‘surcharge.’ It adds an extra 3% – 15% to the SDLT. This applies to people who live overseas but buy property in the UK. If the amount is on the expensive side, the reliefs are provided as well.
  • Inheritance tax (IHT) – This tax has to be paid by a property owner on death or if you are currently not in the UK. If you buy a UK property from an offshore company, it is still a part of the UK and thus comes under the ‘UK situs.’ That means you will have to pay the tax for this. The reason why it’s called inheritance tax because upon death, the responsibility of paying tax transfers to the kids if the previous owner wants so. This can cause many disadvantages.
  • Non-resident capital gains tax (NRCGT) is for the expats living in the UK or owning a property. For this tax, the amount is deducted from their UK-based income. Unlike the UK residents who have the income calculated on a worldwide basis.
  • Annual tax on enveloped dwelling (ATED) is for properties bought by ‘non-natural persons,’ that is, the companies. They have to submit the ATED at the end of the year, and the amount increases depending on the inflation for the year and the property’s value.

Most of these taxes are based on either buying the property or selling it. But the tax that you have to pay regarding the rents, is different. This is usually paid through self-assessment tax payment. As a landlord, who may have their income through house rentals as the only medium – may come under the self-employed category. And for them, the landlord tax return is important. Here, the tax imposed is based on the amount of work you have put in the house rather than the tenant.

Like every property tax, the tax imposed on properties is based on their value in the market. So to maximize your income from a property tax return, workout on the landlord tax deductions and try to decrease that compared to the original amount. This way, you can manage the money and build an impressive portfolio.

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