What taxes do landlords have to pay in the UK?
There are five main types of tax that landlords have to pay:
1. Stamp Duty
Stamp duty is usually the first tax that landlords have to deal with.
You pay it when you buy any property in the UK.
The rate depends on the purchase price:
| Property purchase price | Stamp duty |
|---|---|
| up to £125,000 | 0 % |
| £125,001 – £250,000 | 2 % |
| £250,001 – £925,000 | 5 % |
| £925,001 – £1,500,000 | 10 % |
| over £1,500,000 | 12 % |
You pay an additional 3% in Stamp Duty if you’re purchasing:
- a buy-to-let investment
- a second home.
Scotland and Wales have different rates and exemptions.
2. Rental Income Tax
To calculate it, add the rent (minus expenses) to your other income sources: this determines your tax band.
| Income | Tax rate | Description |
|---|---|---|
| up to £12,500 | 0 % | Personal allowance |
| £12,501 to £50,000 | 20 % | Basic rate |
| £50,001 to £150,000 | 40 % | Higher rate |
| over £150,000 | 45 % | Additional rate |
Check out our guide to paying tax on rental income for more information.
3. National Insurance
You need to pay Class 2 National Insurance on your rental income if:
- HMRC decides that you have “a property business”, and
- your profits are over £6,475 per year.
4. Capital Gains Tax (CGT)
You need to pay CGT when you sell property for a profit:
| Overall annual income | CGT rate (applies to your entire CGT profit) |
|---|---|
| below £50,000 | 18 % |
| over £50,000 | 28 % |
You don’t pay CGT for:
- capital gains under £12,300.
- selling your main home.
Check out our CGT calculator for more details.
How you pay CGT on property:
- until this year, you could pay your CGT bill either by filing a Self Assessment tax return or by using HMRC’s Real Time Capital Gains Tax Service
- however, starting from April 2020, all UK tax residents who sell property for a profit (except, of course, your home), have to use only the Real Time Capital Gains Tax Service
- this means that you don’t need to file a Self Assessment anymore unless your income changes significantly during the year (there are different CGT rates if your income is under or over £50,000), or if you have another reason to file a tax return (for example, self-employment income).
5. Inheritance tax
Inheritance tax is a tax on everything you leave when you pass away (also called your “estate“):
| Who owns the estate | Estate value | Inheritance tax |
|---|---|---|
| Yourself | under £325,000 | 0% |
| Yourself | over £325,001 | 40% |
| Couple / Civil partnership | under £650,000 | 0% |
| Couple / Civil partnership | over £325,001 | 40% |
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