What You Need to Know About the Property Tax for Non UK Residents


UK estate property, especially in good London locations, has always raised interest from international investment sources. At present times the UK property starts to emerge from recession and that creates new opportunities for estate investment. In order to deal with UK tax at source on income the UK estate should be carefully structured. For the non UK residents there are taxes on rents and also inheritance taxes or stamp taxes to consider. In general an individual is considered to be a non UK resident if he does not have his primary residence in UK.

To be considered a non resident the person needs to spend less than 183 days in any tax year in the UK. Another rule under which an individual may be considered a non UK resident is if he spends less than 91 days on average in the UK over a 4 year period. However, HMRC will look at all the circumstances of a person’s lifestyle in determining residence.

Property tax for non UK residents

For non residents that are looking to purchase a single UK property is important to know that a private use property is not subject of any taxes on income due to be paid in UK if the owner is a non resident. Also the non resident individual is not subject to paying UK tax on capital gains. That meaning the investment properties can be sold at a gain in the future without paying tax on these gains. On the other side, if a non resident makes profits from renting property in UK those profits are taxable in UK. Is the rental property is owned by an non resident individual owner then the profits from renting are taxed at a rate between 20% and 50%, depending on the level of those profits.

For non resident companies the tax is 20% on the rental income. From those figures it can be seen that is preferable that an investment in renting property to be made through a non resident company rather than a non resident individual. Non UK residents that are owners of rental property on the territory of the UK have to apply for a Unique Taxpayer Reference. The rule in the UK is that the tax year runs from 6 April to the following 5 April and the return of filled tax papers is due by 31 January of the following year. When purchasing a real estate property in UK the non residents have to pay a UK Stamp Duty/Land tax. This tax is variable between 1% and 4% and depends on the cost of the property. Another tax that should be paid on the purchase of property is 20% VAT tax.

When buying or selling residential property in UK the non residents are advised to seek tax advice as early as possible. The so called Non-resident Landlords Scheme refers to the modality of collecting tax on the UK rental income of non-resident who own real estate rental property in the UK, but live outside of the country. If you're not resident in the UK, even if tax is due in the UK, it’s possible that the country you live in might want to tax you on your worldwide income. Only in the case that your country of residence has a double taxation agreement with the UK you will not have to pay tax twice on the same income.

New tax rules since 1 July 2013

Non UK Resident Tax1 July 2013, HM Revenue and Customs released some new tax rules for non UK resident companies that own UK residential property with values above £2 million. The new rules include an increased SDLT rate of 15% and also a widening of the base for Capital Gains Tax.

Gains made on selling of UK residential property by non UK resident non-natural persons will be now subject to CGT. Non-natural persons will include collective investment schemes, companies, and partnerships in which a non-natural person is a partner. Individual non UK residents and most of the trusts are not included.

Until these changes introduced from 1 July 2013 the UK capital gains regime allowed tax to be generally chargeable only on gains made by UK resident individuals or companies and excluded the non resident non-natural persons. The implementation of the new regulations is an important change. The Government’s intention is bring UK tax legislation more in agreement with the tax treatment of real estate property in other countries.