A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. By investing in a REIT, you effectively own a share of a property portfolio without having to buy, manage, or maintain any property yourself. REITs are listed on the stock exchange and can be bought and sold like any other share. UK REITs must distribute at least 90% of their rental profits as dividends, making them popular income investments. They offer exposure to commercial, residential, and specialist property sectors.

How are REIT dividends taxed in the UK?

REIT dividends are split into two types: Property Income Distributions (PIDs) — taxed as property income at your marginal income tax rate (20%, 40%, or 45%), with 20% tax withheld at source — and ordinary dividends (non-PID) — taxed at dividend tax rates with the £500 dividend allowance. PIDs do NOT benefit from the dividend allowance. If you hold REITs in an ISA or SIPP, all dividends are tax-free. This makes holding REITs within a tax wrapper particularly attractive.

Are REITs a good investment?

REITs can be a good investment for diversification and income. They offer exposure to property without the hassle of being a landlord, high dividend yields (typically 3–7%), liquidity (you can sell shares instantly, unlike physical property), diversification across many properties, and professional management. However, they also carry risks: share prices fluctuate with the stock market, rising interest rates tend to hurt REIT prices, and you have no control over the properties or management. They're best suited as part of a diversified portfolio rather than your sole investment.

How do I invest in REITs?

You can invest in UK REITs through any stockbroker or investment platform (Hargreaves Lansdown, AJ Bell, Interactive Investor, Vanguard, etc.). Simply search for the REIT by name or ticker, and buy shares like any other stock. You can also invest in REIT funds or ETFs that hold a diversified basket of REITs. Minimum investments can be as low as the price of a single share (often £1–£20). Holding REITs inside an ISA or SIPP makes dividends and capital gains tax-free.

REITs Guide UK — Property Investing Without Buying Property | PocketWise

REITs let you invest in property without the huge deposit, tenant hassle, or maintenance costs. Here’s how they work.

What Is a REIT?

Feature	Detail
Definition	A company that owns and manages income-producing property
Listed on	London Stock Exchange (UK REITs)
Minimum dividend payout	Must distribute at least 90% of rental profits
Tax at company level	Exempt from corporation tax on qualifying rental income and gains
How to invest	Buy shares through any stockbroker or platform
Minimum investment	Price of one share (often £1–£20)

How REITs Work

Step	Detail
1	REIT raises money by selling shares to investors
2	Uses the money to buy and manage properties
3	Collects rent from tenants
4	Distributes at least 90% of rental profits to shareholders as dividends
5	Shareholders receive regular income and can benefit from capital growth if the share price rises

Types of UK REITs

Sector	What they own	Examples
Commercial office	Office buildings	British Land, Derwent London, Great Portland Estates
Retail	Shopping centres, retail parks	Hammerson, Capital & Regional
Industrial/logistics	Warehouses, distribution centres	Segro, Tritax Big Box
Residential	Rental homes, build-to-rent	Grainger, PRS REIT
Healthcare	Care homes, hospitals, GP surgeries	Primary Health Properties, Assura, Target Healthcare
Student accommodation	Purpose-built student housing	Unite Group, Empiric Student Property
Self-storage	Self-storage facilities	Big Yellow, Safestore
Data centres	Server farms and data centres	Various (more common in US)
Diversified	Mix of property types	Land Securities, British Land

Top UK REITs

REIT	Sector	Typical dividend yield	Market cap
Land Securities	Diversified (offices, retail)	~5–6%	~£5bn
British Land	Diversified (offices, retail, logistics)	~5–6%	~£4bn
Segro	Industrial/logistics	~3–4%	~£10bn
Unite Group	Student accommodation	~3–4%	~£4bn
Primary Health Properties	Healthcare (GP surgeries)	~5–6%	~£2bn
Tritax Big Box	Logistics warehouses	~4–5%	~£3bn
Grainger	Residential (PRS)	~3–4%	~£2bn
Big Yellow	Self-storage	~3–4%	~£2bn
Assura	Healthcare	~5–6%	~£1.5bn
Safestore	Self-storage	~3–4%	~£1.5bn

Yields and market caps are illustrative and fluctuate.

Tax Treatment

Outside a Tax Wrapper

Dividend type	Tax treatment
Property Income Distribution (PID)	Taxed as property income at your marginal rate (20%, 40%, or 45%). 20% is withheld at source. Does NOT use the £500 dividend allowance
Ordinary dividend (non-PID)	Taxed at dividend rates (8.75%, 33.75%, 39.35%). Uses the £500 dividend allowance
Capital gains (selling shares at a profit)	CGT at 18% (basic rate) or 24% (higher rate), with £3,000 annual exempt amount

Inside a Tax Wrapper

Wrapper	Tax on dividends	Tax on gains
ISA	None	None
SIPP/pension	None	None
LISA	None (plus 25% government bonus)	None

Bottom line: Hold REITs in an ISA or SIPP where possible to avoid dividend tax on PIDs.

REITs vs Buy-to-Let

Factor	REITs	Buy-to-let
Minimum investment	~£1–£20 (one share)	£25,000–£75,000+ (deposit)
Diversification	Instant — across many properties	One property (unless very wealthy)
Liquidity	Sell shares instantly	Selling a property takes weeks/months
Management	Professional managers handle everything	You manage (or pay an agent 8–15%)
Leverage (mortgage)	Not available (unless CFDs/spread betting — high risk)	Yes — magnifies gains AND losses
Stamp duty	0.5% (standard share dealing)	3–5%+ surcharge on additional properties
Income yield	3–7% gross	3–6% gross (before costs)
Running costs	Platform fee only (0.1–0.45%)	Maintenance, insurance, void periods, letting fees, mortgage interest
Tax on income	PID taxed as property income (0% in ISA)	Rental income taxed at marginal rate, mortgage interest relief capped at 20%
Capital gains	CGT on gains (0% in ISA)	CGT at 18% or 24% (no ISA wrapper available)
Hassle	None	Significant (tenants, repairs, regulations, void periods)

REITs vs Property Funds

Factor	REITs (listed)	Property funds (open-ended)
Pricing	Real-time share price	Priced daily (with potential lag)
Liquidity	Instant — buy/sell on stock exchange	Can have dealing delays or redemption gates (seen in 2016, 2020, 2022)
Volatility	Higher — share price moves with stock market sentiment	Lower day-to-day, but liquidity risk in crises
Discount/premium to NAV	Often trades at a discount to net asset value	Priced at NAV (but may gate)
Cost	Low (platform fee + dealing charge)	OCF typically 0.5–1.5%

REIT Funds and ETFs

Fund/ETF	What it holds	OCF
iShares UK Property ETF (IUKP)	Diversified UK REITs	~0.40%
L&G UK Property ETF	UK commercial property REITs	~0.22%
SPDR Dow Jones Global Real Estate ETF	Global REITs	~0.40%
Vanguard Global ex-US Real Estate ETF	Global ex-US REITs	~0.12%
iShares Developed Markets Property Yield ETF	Global developed market REITs	~0.59%

Risks

Risk	Detail
Interest rate risk	Rising rates increase borrowing costs and make bonds more attractive vs REITs
Market risk	Share prices can drop significantly in downturns
Sector risk	Some sectors struggle (e.g. retail post-COVID, offices with remote work)
Tenant risk	Major tenants going bust reduces income
Leverage risk	Many REITs use debt — magnifies gains and losses
NAV discount	You might buy at a 10–30% discount OR premium to actual property value
Dividend cuts	Not guaranteed — REITs can cut dividends if income falls