Investing in UK property as a foreigner can be lucrative, but understanding the tax obligations is crucial to making informed financial decisions. The UK imposes various taxes on property transactions, including Stamp Duty Land Tax (SDLT), Capital Gains Tax (CGT), and Inheritance Tax (IHT). This guide explains these key property taxes for overseas investors.

1. Stamp Duty Land Tax (SDLT) for Foreign Buyers

Stamp Duty Land Tax (SDLT) applies to all property purchases in England and Northern Ireland, with additional surcharges for overseas investors.

SDLT Rates for Foreign Investors (2025)

• 2% surcharge for non-UK residents on top of standard SDLT rates.
• Standard SDLT rates:
  • Up to £250,000 – 0%
  • £250,001 to £925,000 – 5%
  • £925,001 to £1.5 million – 10%
  • Over £1.5 million – 12%

Example: If a foreign buyer purchases a £1 million property, SDLT would be calculated as:

• 0% on the first £250,000 = £0
• 5% on £675,000 = £33,750
• 10% on £75,000 = £7,500
• +2% surcharge on the full amount (£1 million) = £20,000
• Total SDLT = £61,250

Who Qualifies for the 2% SDLT Surcharge?

• Buyers who haven’t lived in the UK for at least 183 days in the 12 months before purchase.
• Corporations registered outside the UK.

2. Capital Gains Tax (CGT) for Foreign Investors

If a foreign investor sells a UK property, they are subject to Capital Gains Tax (CGT) on any profit made.

CGT Rates for Non-Residents

• 18% on gains for basic rate taxpayers.
• 28% on gains for higher rate taxpayers.

How CGT is Calculated

• Capital gain = Sale price – Purchase price – Allowable deductions
• A CGT allowance of £6,000 (2025) is available for individuals.
• Non-residents must report and pay CGT within 60 days of sale completion.

3. Inheritance Tax (IHT) for Foreign Investors

Inheritance Tax (IHT) applies when UK property is passed to heirs.

IHT Rates

• 40% tax on property valued above £325,000.
• Nil rate band: The first £325,000 is tax-free.
• Potential exemptions: Properties left to spouses or charities may qualify for relief.

Mitigating IHT for Foreign Investors

• Holding property through a UK-based company may help reduce exposure to IHT.
• Life insurance policies can help cover IHT liabilities.
• Gifting property 7+ years before death can reduce tax liability.

4. Other UK Property Taxes for Foreign Investors

• Annual Tax on Enveloped Dwellings (ATED): Applies to properties held in corporate structures valued over £500,000.
• Rental Income Tax: Non-residents earning rental income from UK property must pay UK income tax, with rates of 20-45% depending on earnings.

5. Conclusion: Managing Your UK Property Tax Liability

Foreign investors must carefully plan their UK property purchases to minimize tax liabilities. Understanding SDLT, CGT, and IHT ensures compliance and helps investors make informed financial decisions.

Need Tax Guidance for UK Property Investments?

Get in touch with TrustPoint for expert advice on tax-efficient property investments in the UK!