International families continue to be interested in the UK residential property market for personal occupation or investment purposes. Although it’s expected that interest from certain jurisdictions may decrease due to the UK non-dom tax regime changes (amongst other reasons), interest from others (most notably, the US) is expected to remain strong. London continues to remain attractive from an education standpoint and is still perceived as a transparent and safe jurisdiction.
Most buyers only tend to consider tax implications after they have made an offer on a property, when in reality the true cost of the acquisition cannot be ascertained without a tax assessment. Some of the common areas we encounter where specialist UK tax input is needed includes:
- Stamp Duty Land Tax (SDLT) - if you buy a property in England or Northern Ireland, you will have to pay SDLT on the purchase price. This is irrespective of whether you purchase the property as an individual or through a structure. SDLT rates thresholds are increasing from 1 April 2025, so many will be trying to complete purchases before then. The amount of SDLT payable will depend on a number of factors, including:
- whether you’re an individual, a company or a trust (or indeed another type of entity which may be treated in a particular way for UK tax purposes);
- whether you or your spouse own other residential property anywhere else in the world;
- whether you’re a UK or a non-UK resident; and
- whether the property is residential, commercial or has “mixed” uses.
- Annual Tax on Enveloped Dwellings (ATED) – if purchasing a UK residential property through a company, buyers should be mindful that ATED is payable every year in which a company owns a UK residential property valued at more than £500,000. This tax applies regardless of whether the company is UK or non-UK tax resident and there are annual filings that must be made to claim any potential reliefs.
- Taxes on funding the purchase price – there may be additional taxes due on extracting (e.g. from a company or a trust) and bringing funds to the UK to purchase the property. Some planning opportunities and reliefs may be available, some of which need time to be implemented.
- Ongoing and future taxes – depending on the chosen holding structure and future use of the property, additional taxes may be payable (including taxed on rental income, gains on a future sale or other disposal of the property and/or inheritance tax on death). Some of these taxes can be particularly high (e.g. UK inheritance tax rate is 40%) but reliefs can be available, so specialist advice should be taken to optimise the position.
In addition to tax considerations, there may be non-tax factors (e.g. asset protection, privacy and costs) to bear in mind. UK Wills and Lasting Powers of Attorney are also strongly recommended.
Our Real Estate and Private Client teams work closely together to provide a holistic approach to all legal and tax matters and would be pleased to advise further in this area. Contact Helen Curtis-Goulding, Real Estate Partner, Katya Vagner, Private Client Partner, or Lily Grocott-Barrett, Associate for any queries.
