How to Calculate Property Taxes in the UK

Before you buy a property in the UK (except Scotland), you must know how much the property tax will be. By calculating it before the complete process takes place, you will avoid being hit by an unexpected expense. In order to understand UK property taxes, read on.

See Also: How to Calculate Self-Employment Tax in the UK

1. Overview

A property owner is required to pay the Standard Duty Land Tax (SDLT) if the property or piece of land is purchased in England, the Wales, and Northern Ireland and exceeds a specific value. However, in Scotland, the SDLT property tax no longer applies. Land and Buildings Transaction Tax is paid instead.


2. SDLT Value Paid

Currently, the value that applies to residential and non-residential properties is £125,000 and £150,000 respectively.

The amount you pay is based on whether the property or land is residential (meaning you plan to live there) or non-residential (meaning for business or rental purposes). If you plan to live on the property and use it for income purposes, the non-residential rates apply.

The overall amount applied to the SDLT payment (often referred to as “the consideration”) is typically the price that was paid for the property or piece of land.

Other types of payment applied may be:

  • goods
  • release from a debt
  • work or services
  • transfer of a debt including the value of any outstanding mortgages

3. How and When to Pay

You are required to return and pay the tax within 30 days of completion.  

Completion is termed as the exchanging of contracts along with any remaining checks the buyer has asked for. First, the money changes hands from the buyer to the seller. Second, legal documents are produced and transferred to the buyer as evidence of ownership. Third, the seller vacates the property and leaves it in the condition as agreed on in the contract. Finally, the seller hands over the keys to the buyer who now officially owns the property.

If a conveyancer, agent, or solicitor is involved, this party will usually file the return for you and pay the tax on your behalf on the day the completion takes place. The total amount paid includes their fees. If they don’t do this for you, you can file the return and pay the taxes yourself. In some situations, you may not be required to send in a return.

4. Rates

Rates can be calculated by entering the SDLT value in either the residential or non-residential box (one or the other but not both).

The chart below gives property tax percentages according to the value of the property (in July of 2015) as determined by the SDLT calculator:

Residential Rates:

Property Value (£) Percentage (%) SDLT (£) 
Up to 125,000 0 0
> 125,000 to 250,000 2 0
> 250,000 to 925,000 5 0
> 925,000 to 1,500,000 10 0
Over 1,500,000 12 0

 Non-Residential Rates:

(Rates are based according to single values)

20 percent discount
20 percent discount
Property Value (£) Percentage (%) SDLT (£)
100,000 0 0
200,000 1 2,000
500,000 3 15,000
750,000 4 30,000
1,000,000 4 40,000
1,500,000 4 60,000

5. Property Taxes in Scotland

In October of 2014, Scotland had proposed property tax cuts for lower priced homes. However, there will be an increase for those who own more expensive homes. Homes valued at £145,000 or less would not have to pay property taxes. On the other hand, residents owning homes valued at £750,000.01 or more will be subject to a rate of 12%.

Below is a chart listing property tax rates in Scotland:

Property Value (£)

Tax Rate (%)

Up to 145,000

0

145,000.01 to 250,000

2

250,000.01 to 325,000

5

325,000.01 to 750,000

10

750,000.01 and Up

12

The revision of property tax was created by Deputy First Minister, John Swinney. After revising the Land and Building Transaction Tax, half of all homeowners were not subject to property taxes while about 40,000 would have tax cuts.


See Also: How to Calculate Property Taxes in the US

Now that you have a basic understanding of the property tax rates in the UK, you know the amount that you’ll pay annually. Knowing the SDLT amount, you can budget accordingly.

For further details, you may want to visit the Property Tax Portal website as it answers over 100 questions that property owners have submitted in the past 12 months. If you have a question about UK property taxes, feel free to post it there.

If you have any further advice, use the comments section below and let us know.