Navigating UK property taxation can be tricky, especially for expats and non-residents. Whether you're buying, selling, or renting property in the UK, understanding how tax rules apply to your situation is essential. In a recent episode of the Tax Compass Podcast, Laura and Simon from LSR Partners shared valuable insights into UK property tax and how to avoid common mistakes.

Why Property Tax Matters

Property taxation in the UK has become a hot topic in recent months. Leading up to the October budget, there was speculation that capital gains tax on property would increase. While that didn’t happen, the adjustments to non-property capital gains tax rates have left many property owners concerned.

Additionally, new energy efficiency requirements for rental properties are coming into force. By 2030, all rental properties will need to have an energy efficiency rating of C or higher. This will likely cost landlords billions of pounds in upgrades and improvements.

If you're involved in property investment or planning to sell, now is the time to understand how these changes could impact you.

Capital Gains Tax on UK Property

If you’re a UK resident selling a property, you need to be aware of capital gains tax (CGT) rules. When you sell a property that is not your main home, you must report the capital gain and file a CGT return within 60 days of the sale’s completion.

If you’ve always lived in the property as your main residence, you may be eligible for Principal Private Residence (PPR) Relief. This relief means that if the property was your main home for the entire period of ownership, you won’t need to pay capital gains tax or report it to HMRC.

However, PPR Relief only applies if the property qualifies under certain conditions, including land size. If the property includes more than half a hectare (about 1.2 acres), you might still face a CGT liability.

Capital Gains Tax on Overseas Property

Selling a home outside the UK while being a UK resident brings additional complexities. If you’ve recently moved to the UK and sell a property within nine months of relocating, HMRC may allow PPR Relief.

For example, if you get a job opportunity that requires you to move, but the property sale is delayed, you may not face a tax charge. However, holiday homes or investment properties overseas that were never used as a main residence are not eligible for this relief.

Listen to, and watch the new Tax Compass podcast here

Tax Considerations for Non-Residents

If you're a non-resident selling UK property, capital gains tax still applies. Non-residents must report any sale of UK property, whether direct or indirect, even if PPR Relief applies.

Direct disposals involve selling property held in your name. Indirect disposals involve selling shares in a property-rich company. If the property was acquired before April 2015, you have three ways to calculate the gain:

• Rebasing – Using the property’s value as of April 2015.
• Straight-line apportionment – Spreading the gain over the entire ownership period.
• Whole gain or whole loss approach – Taxing the entire gain based on the property’s original purchase value.

Choosing the right method can significantly reduce your tax liability.

Renting Property as a Non-Resident

If you move overseas and rent out a UK property, you’ll likely become a non-resident landlord. Under HMRC’s rules, letting agents or tenants are required to withhold 20% of rental income as tax unless you register under the Non-Resident Landlord Scheme.

By registering, you can receive rental income without tax being withheld. However, you’ll still need to file a UK tax return and declare the income. Jointly owned properties must be declared equally unless you’ve submitted a Form 17 to HMRC to adjust the ownership split.

Common Property Tax Mistakes

Many landlords mistakenly believe that if their UK property income is taxed abroad, they don’t need to report it in the UK. This is not the case. All UK-based property income must be reported to HMRC, even if it’s taxed elsewhere.

Another common error is failing to report a sale because you assume PPR Relief applies. If you’re a UK resident, you don’t need to file a return for properties covered by PPR Relief. However, non-residents must always report UK property sales — even if no tax is due.

Planning Ahead

Property tax rules in the UK are complex and subject to change. Many people are exiting the rental market due to high interest rates and increased costs. The government’s stance on landlords could make property investment less attractive in the future.

If you’re considering buying, selling, or renting property in the UK — or moving overseas — it’s crucial to have a clear tax strategy. At LSR Partners, we specialise in helping expats and non-residents navigate UK property tax rules.

Get in touch with us today to discuss your property tax position and avoid costly mistakes.

Book a consultation today – We’ll help you pay the right tax, in the right place, at the right time.

Listen Now

Listen to the latest episode of The Tax Compass Podcast here.

At LSR Partners, we’re here to ensure you pay the right tax, in the right place, at the right time. Book a consultation with us today to learn how we can support your journey.