Investing in UK property as a non-resident: SDLT, CGT, IHT and other tax rules explained

UK property tax for non-residents: key rules and recent changes

UK tax rules for non-residents holding UK property have changed significantly in recent years. What was once a relatively straightforward position now involves multiple taxes applying at different stages of the property life cycle.

Whether property is held directly or through a structure, individuals, trustees and companies can all fall within scope. Understanding how the rules apply on purchase, holding and disposal is key.

UK property tax for non-residents: key taxes and rules at a glance

• What taxes apply? SDLT on purchase, income or corporation tax on rental profits, ATED in some cases, capital gains tax or corporation tax on disposal, and potentially IHT and VAT. 

• What’s changed in recent years? Since 2015 and 2019, non-residents have been brought within UK tax on gains from both residential and commercial property, including certain indirect disposals, and in 2017 and 2025 the inheritance tax rules changed. 

• New development: A High Value Council Tax Surcharge is expected from April 2028 for residential properties valued at £2 million or more.

Buying UK property as a non-resident: what taxes apply?

Stamp Duty Land Tax (SDLT) for non-residents: rates and key rules

Buyers of UK property pay Stamp Duty Land Tax (SDLT) in England and Northern Ireland, Land and Buildings Transaction Tax (LBTT) in Scotland and Land Transaction Tax (LTT) in Wales.

LBTT and LTT are broadly similar to SDLT, but the regimes are not identical, and specific advice should be taken when buying property in Scotland or Wales.

For residential property, higher rates may apply where the purchaser:

• Is non-UK resident.
• Already owns residential property.
• Is a company or other ‘non-natural person’.

SDLT rates on residential property valued at more than £1.5 million can be up to 19%.

Lower rates generally apply to commercial property, with the top rate currently 5% on freehold purchases.

An SDLT return must generally be filed, and any tax paid, within 14 days of completion.

UK property ownership rules: registration and transparency requirements for non-residents

Non-residents buying UK property need to register ownership or beneficial interests under UK transparency rules. Depending on the purchasing structure registration must be made via:

• The Land Registry,
• The Register of Overseas Entities at Companies House, or
• The Trust Registration Service.

In Scotland, a separate Register of Persons Holding a Controlled Interest in Land (RCI) applies, meaning some structures may need to comply with both Scottish and UK transparency regimes.

Failure to comply can lead to penalties and may restrict the ability to deal with the property.

How UK property is taxed for non-residents during ownership

Tax on UK rental income for non-residents

Rental income from UK property is taxable in the UK regardless of the owner’s residence status.

• Individuals and trustees are subject to income tax on net rental income.
• Companies are subject to corporation tax on rental profits.

Depending on the circumstances, this can mean income tax at rates of up to 45% (or 48% in Scotland) for individuals, or corporation tax (currently up to 25%) for companies.

Non-resident landlord scheme (NRLS): how tax is withheld and reported

Under the non-resident landlord scheme (NRLS):

• Letting agents (or tenants where no agent is used) must generally deduct basic rate income tax (currently 20%) from rents paid to non-resident landlords.
• Landlords can apply to HMRC to receive rents gross.
• Any tax withheld is set against the landlord’s overall UK tax liability rather than being a final tax charge.

This is an important compliance area, particularly where agents or tenants are responsible for withholding.

ATED explained: when non-residents pay tax on enveloped dwellings

Annual Tax on Enveloped Dwellings (ATED) is an annual charge that can apply where UK residential property valued above £500,000 is held by ‘non-natural’ persons (companies, partnerships with a corporate member, and certain collective investment vehicles).

ATED applies to property that is used, or suitable for use, as a dwelling (for example a house or flat), including associated land such as gardens and grounds.

The amount payable is based on the property’s value using a banded system, with charges increasing for higher value properties and updated annually.

Reliefs and exemptions are available in many cases, for example where property is let commercially, held for development or used in a property trading business. However, an ATED return is generally still required annually, even where full relief applies.

Returns and any tax due are generally payable at the start of the ATED year (1 April), rather than after the year end.

High Value Council Tax Surcharge (HVCTS): new ‘mansion tax’ rules from 2028

Residential property in the UK (excluding Northern Ireland, which has a separate system) is generally subject to council tax, a local authority charge based on the value of the property, subject to various discounts and exemptions.

A new High Value Council Tax Surcharge (HVCTS) is expected to apply from April 2028 to residential properties in England valued at £2 million or more.

This is sometimes referred to as a ‘mansion tax’, although it operates as a surcharge on the existing Council Tax system.

Under current proposals:

• The charge will apply to property owners rather than occupiers.
• It will be payable in addition to standard Council Tax.
• Properties will be grouped into value bands with fixed annual charges.
• The charges will range from £2,500 for properties valued at £2-2.5 million to £7,500 for properties valued at £5 million or more.
• Further detail, including reliefs and exemptions and the rules for more complex ownership structures, is subject to consultation.

Although not yet in force, it represents a further development in the taxation of high-value UK residential property.

The surcharge applies to England only, reflecting the fact that council tax is devolved. Scotland and Wales operate separate council tax regimes and would need to introduce their own measures if similar changes were to be made.

VAT on UK property: key considerations for non-residents

The VAT treatment of UK property depends on the type of property and the nature of the transaction.

• Sales and lettings of residential property are generally exempt, although the first sale or grant of a long lease of a new dwelling may be zero-rated.
• Supplies of commercial property are normally exempt, but can become subject to VAT where the owner has opted to tax.
• Where VAT applies, it is typically charged at the standard rate (currently 20%).
• Certain transactions, including the transfer of a property rental business, may qualify as a transfer of a going concern (TOGC) and fall outside the scope of VAT.

The VAT position can affect both the cost of acquisition and the ability to recover VAT on associated expenses, so it should be considered early in any transaction.

Inheritance tax (IHT) on UK property for non-residents

Inheritance tax (IHT) generally applies to transfers of value, including assets held at death, certain lifetime gifts and transfers into trust.

A tax-free threshold (the nil-rate band) of £325,000 generally applies, with an additional £175,000 residence nil-rate band potentially available where a home is passed to direct descendants.

IHT applies at different rates depending on the type of charge. In broad terms:

• A rate of up to 40% can apply on death, and to lifetime gifts made within seven years of death.
• Transfers of assets into trust may give rise to an immediate 20% charge.
• Trusts may also be subject to ongoing charges of up to 6% every 10 years, and on certain distributions.

The rules for non-UK individuals have changed significantly from April 2025, with exposure to IHT on non-UK assets now based on UK residence rather than domicile status. Individuals who have been UK resident for at least 10 of the previous 20 tax years may be subject to IHT on their worldwide assets.

• Directly held UK real estate will always with within the scope of IHT.
• UK residential and agricultural property is within the scope of IHT whether held directly or indirectly, including through offshore companies.
• Historic offshore structures no longer provide IHT protection for residential or agricultural .

Where property is financed using debt, this may reduce the value subject to IHT. However, this depends on how the borrowing is structured and secured, and anti-avoidance provisions can apply.

Tax on selling UK property as a non-resident: CGT and corporation tax rules

Tax on selling UK property as a non-resident

The UK tax treatment of non-residents disposing of UK property has changed significantly in recent years.

Since April 2019, non-residents are subject to UK tax on gains arising on the disposal of all UK land and property, whether residential or commercial. This applies to individuals, trustees and companies, although companies are subject to corporation tax rather than capital gains tax.

Direct disposals of UK property

Disposals include not only outright sales, but also gifts, transfers or exchanges of UK property.

To ensure the rules are not applied retrospectively, gains are generally calculated by reference to increases in value from:

• April 2015 for residential property already within scope.
• April 2019 for disposals of other property and for indirect disposals.

This means that a valuation at these dates may be required where property was acquired before the relevant change in the rules.

Indirect disposals: tax on selling shares in UK property-rich companies

The rules also apply to disposals of interests in ‘property rich’ entities. Broadly, this includes:

• Companies or other entities where at least 75% of their value derives from UK land, and
• Where the seller has a 25% or greater interest, including interests held through connected parties.

A limited exemption may be available where the underlying UK land is used in a genuine trading business (although this will not apply to property letting businesses).

Tax rates and compliance

Individuals and trustees are subject to UK capital gains tax (up to 24%) depending on income level, while companies are charged to corporation tax on gains (up to 25%).

Non-resident individuals must usually report a disposal and pay an estimate of the tax due within 60 days of completion, with any final adjustment made through the self-assessment process.

Double tax relief may be available where the disposal is also taxable in another jurisdiction, or under the terms of a treaty with another jurisdiction.

Given the breadth of the rules and the potential for unexpected charges, professional advice should be sought before undertaking a disposal.

When UK property profits are taxed as income instead of capital gains

Separate rules can apply where property is acquired or developed with a view to profit.

In these cases, profits may be taxed as income rather than capital. These rules apply to both direct disposals of land and indirect disposals such as share sales.

How Saffery can help with UK property tax planning for non-residents

Our tax specialists advise individuals, trustees and corporates on the UK tax implications of holding UK property as a non-resident.

We can support you with:

• Choosing an appropriate ownership structure, including direct ownership, trusts and corporate structures.
• Reviewing existing arrangements in light of changes to capital gains tax and inheritance tax rules.
• Advising on UK tax compliance, including the non-resident landlord scheme and reporting obligations.
• Assessing exposure to ATED, inheritance tax and other UK property taxes.
• Planning for acquisitions and disposals, including managing UK tax liabilities and reporting requirements.
• Coordinating UK advice with overseas tax positions and double taxation agreements.

We work closely with overseas tax advisers, often through the Nexia network, to ensure that international aspects are appropriately managed.

If you would like to discuss any of the issues covered in this article, please speak to your usual Saffery contact or get in touch with Alexandra Britton-Davis.