Property is one of the most heavily taxed assets in the UK. From the moment you buy to the day you sell — and potentially after death — various taxes apply. This guide covers every property-related tax so you can plan effectively and avoid surprises.
Taxes When Buying
Stamp Duty Land Tax (SDLT) — England & Northern Ireland
| Property Price Band | Standard Rate | First-Time Buyer Rate |
|---|---|---|
| Up to £250,000 | 0% | 0% (up to £425,000) |
| £250,001–£925,000 | 5% | 5% (above £425,000) |
| £925,001–£1,500,000 | 10% | 10% |
| Above £1,500,000 | 12% | 12% |
First-time buyers pay no stamp duty on properties up to £425,000 and 5% on the portion between £425,001 and £625,000. Properties over £625,000 do not qualify for first-time buyer relief.
Additional property surcharge: An extra 5% applies across all bands if you already own a property. Use our stamp duty calculator for exact figures.
Land and Buildings Transaction Tax — Scotland
Different rates apply in Scotland. Use our LBTT calculator.
Land Transaction Tax — Wales
Wales has its own rates. Use our LTT calculator.
Taxes When Owning
Council Tax
An annual local tax based on your property’s valuation band. See our council tax guide for bands, discounts, and how to appeal.
Income Tax on Rental Income
If you rent out property, the rental profit (income minus allowable expenses) is taxed as income:
| Band | Tax Rate |
|---|---|
| Basic rate | 20% |
| Higher rate | 40% |
| Additional rate | 45% |
Allowable Deductions
| Deductible | Not Deductible |
|---|---|
| Letting agent fees | Mortgage capital repayments |
| Insurance (landlord/buildings/contents) | Personal use costs |
| Maintenance and repairs | Improvement costs (capital expenditure) |
| Ground rent and service charges | Your own labour |
| Accountancy fees | Furniture (unless FHL or replacement of domestic items relief) |
| Travel to property (reasonable) | Initial property purchase costs |
Mortgage Interest Restriction
Since April 2020, mortgage interest is no longer deductible from rental income. Instead, landlords receive a basic rate tax credit (20% of mortgage interest). This particularly hits higher rate taxpayers:
Example: £15,000 rental income, £8,000 mortgage interest, £2,000 other expenses
| Taxpayer | Tax Before Credit | Less: 20% Credit | Tax Due |
|---|---|---|---|
| Basic rate (20%) | £2,600 (20% × £13,000) | £1,600 | £1,000 |
| Higher rate (40%) | £5,200 (40% × £13,000) | £1,600 | £3,600 |
The higher rate landlord pays £3,600 in tax on £5,000 of net rental profit after mortgage interest — an effective rate of 72%.
Taxes When Selling
Capital Gains Tax
If you sell a property that is not your main residence, you pay CGT on property at 18% (basic rate) or 24% (higher rate).
Main residence exemption: Your home is exempt from CGT under Private Residence Relief. Only investment properties, second homes, and buy-to-lets are taxable.
60-day reporting: You must report and pay CGT within 60 days of completing the sale.
Taxes on Death
Inheritance Tax
Property forms part of your estate. The standard IHT position:
| Threshold | Amount |
|---|---|
| Nil rate band | £325,000 |
| Residence nil rate band (main home to direct descendants) | £175,000 |
| Combined per person | £500,000 |
| Combined for married couple | £1,000,000 |
Above these thresholds, IHT is charged at 40%. See our inheritance tax guide and gift tax guide.
Tax Comparison: Homeowner vs Landlord
| Tax | Homeowner (Main Residence) | Landlord (Buy-to-Let) |
|---|---|---|
| Stamp duty on purchase | Standard rates (FTB relief available) | Standard + 5% surcharge |
| Council tax | Paid by homeowner | Paid by tenant (usually) |
| Income tax on rental income | N/A | Yes (at marginal rate) |
| Capital gains on sale | Exempt (PRR) | 18% or 24% |
| Inheritance tax | Yes (with RNRB available) | Yes (no RNRB) |
Tax-Efficient Property Strategies
1. Maximise Allowable Expenses
Claim every legitimate expense against rental income. Keep detailed records and receipts.
2. Consider a Limited Company
Some landlords hold property through a company. Corporation tax (25%) can be lower than personal tax, and mortgage interest is fully deductible. However, extracting profits still incurs personal tax, and there are setup costs and ongoing compliance requirements.
3. Use Your Spouse’s Tax Band
If one spouse is a lower-rate taxpayer, consider owning property in their name (or in appropriate shares) to reduce the overall tax rate on rental income. Married couples can file a Form 17 to split income according to actual ownership shares.
4. Understand Capital Allowances
Some features of a rental property qualify for capital allowances — particularly in furnished holiday lets and commercial properties.
5. Plan for Inheritance
The residence nil rate band can shelter up to £175,000 (per person) when passing your home to children or grandchildren. Ensure your will is structured to take advantage of this. See our wills and estate planning guide.
6. Time Disposals Carefully
Spread property sales across tax years to use multiple CGT annual exempt amounts, and consider your overall income in each year to minimise the rate at which gains are taxed.