London property tax

Here we are going to discuss about the types of London property tax that you are liable to pay. We also want to show you what are the items which you can claim to reduce the amount of tax payable. Below is the general explanation about London property tax when you purchase London residential property. We advise you to engage professional tax expert if you have personal circumstances and would like to discuss about more specific case.

5 Types of London property tax

Stamp Duty Land Tax (SDLT)

The first London property tax you have to include into your cost when you decide to purchase property in London is stamp duty land tax.

Stamp duty land tax is payable upon your completion of your property. Below are the stamp duty land tax rate effective from 4 December 2014

Property purchase price

SDLT rate from 4 December 2014

Up to £125,000


£125,001 - £250,000 (Next £125,000)


£250,001 - £925,000 (Next £675,000)


£925,001 - £1,500,000 (Next 575,000)


Above £1,500,000


Starting April 2016, Extra 3% stamp duty will be introduced for purchases of additional residential properties costing more than £40,000, such as buy to let properties and second homes.

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    Council Tax

    Annual London property tax also known as council tax is the main form of local property taxation. It is charged on domestic property and is collected by local authorities. Generally the higher price, the greater tax will be.

    Each local authority keeps a "Valuation list" of all domestic property in its area. Property value are assessed annually and put into valuation band with corresponding charge.

    If you are an investor and you rent our your property, council tax will be payable by the tenants.

    Because the council tax rate is not fixed and it is assessed periodically, you can refer to or you can check with the property consultant who are assisting you in your purchase.

    Rental income tax

    The London rental income tax rate is 20% after netting off all the allowable property related expenses.

    Net Rental Income (Per person)

    Rental Income Tax

    Up to £32,000


    £32,001 - £150,000


    Over £150,000


    If property name under 2 names, the total net rental income that will fall under 40% rate is above £64,000.

    Here is the list of allowable expenses you can deduct off to save your rental income tax:

    • letting agents’ fees
    • legal fees for lets of a year or less, or for renewing a lease for less than 50 years
    • accountants’ fees
    • buildings and contents insurance
    • interest on property loans
    • maintenance and repairs to the property (but not improvements)
    • utility bills, like gas, water and electricity
    • rent, ground rent, service charges
    • Council Tax
    • services you pay for, like cleaning or gardening
    • other direct costs of letting the property, like phone calls, stationery and advertising

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      Capital gain tax

      For non residents, capital gain tax is a new London property tax that they are liable to pay. Starting from April 2015, non resident who dispose their London property needs to pay capital gain tax. If you have bought your property before 5 April 2015, whatever you gain before 5 April 2015 is not subjected to capital gain tax.

      The capital gain tax rate depends your basic income tax band which is £31,871 for 2015 to 2016 tax year. If you fall into the basic income tax band, you will pay 18% capital gain tax. Any amount above, you will need to pay 28%. Moreover, there is £11,100 annual exempt amount for 2015/2016.

      Inheritance tax

      Everyone in 2015-1026 tax year has free tax allowance of £325,000. This allowance has remained the same since 2010-2011 and it will stay until at least 2017. Any amount above this threshold will be charged at 40% for inheritance tax. To avoid or reduce the amount of inheritance tax, when you buy London property, it is advisable to buy under 2 names or more because the threshold is for each individual.

      The threshold per person is £325,000, so if property bought under 2 names, the threshold will be £650,000

      Anything over the threshold will be subject to 40% tax

      According to 2015 budget, new provision allowing individuals and married couples to pass on their home with a smaller tax liability.

      2017-2018: £100,000, total threshold: £850,000 (2 persons)

      2018-2019: £125,000, total threshold: £900,000 (2 persons)

      2019-2020: £150,000, total threshold: £950,000 (2 persons)

      2020-2021: £175,000, total threshold: £1,000,000 (2 persons)

      It will then increase in line with Consumer Prices Index (CPI) from 2021 to 2022 onwards.

      7 Years Rule

      If you pass on your property more than the threshold value as a gift, the 7 years rule apply

      Year between gift and death

      Tax paid

      Less than 3 years


      3 to 4


      4 to 5


      5 to 6


      6 to 7


      7 or more


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