PROPERTY // Owning Property in the UK: A Comprehensive Guide for UK and Non-UK Residents
The UK property market remains one of the world’s most desirable, yet few realise just how complex the tax and legal landscape has become. From SDLT surcharges to inheritance tax traps, the difference between a simple purchase and a sustainable legacy often lies in the structuring. For UK and non-UK residents alike, the right approach can determine whether a townhouse becomes a family asset or a tax burden. Our latest guide unpacks the rules, reliefs, and risks — with scenarios showing how high-net-worth families can optimise for efficiency, succession, and resilience.
The United Kingdom has long held an enduring appeal for property investors. From Georgian townhouses in Belgravia to modern penthouses in Mayfair, UK real estate offers not only prestige but also perceived stability in an increasingly uncertain world. Yet the financial and legal landscape surrounding UK property ownership is anything but simple. Tax rules differ sharply depending on whether you are UK-resident or non-UK resident, and structuring choices can significantly affect efficiency, liability, and long-term outcomes.
This guide outlines the key considerations, legal frameworks, tax treatment, and structuring options, for both UK and non-UK residents, with scenarios to illustrate how high-net-worth (HNW) families can optimise holdings.
1. Understanding Residency and Domicile
Before considering ownership, the first step is clarifying tax residency and domicile status, as these drive exposure to UK taxation.
UK Residents are taxed on worldwide income and gains.
Non-UK Residents are typically taxed only on UK-source income and UK property gains.
Domicile, a separate concept, determines exposure to UK inheritance tax (IHT). Even non-UK residents may fall within IHT if deemed UK-domiciled.
Case Example: A French national living in Paris who acquires a London flat will be taxed on rental income and UK property gains, but not on French income. If they become UK-resident and remain long-term, exposure widens significantly.
2. Structuring the Purchase
The method of ownership is critical. Each route carries different tax and legal implications:
a) Direct Personal Ownership
Simplest option but exposes the property to UK IHT at 40% above the nil-rate band.
Rental income taxed at up to 45% (UK residents) or 20% basic rate (non-residents, unless treated as a UK taxpayer).
Capital gains tax (CGT) applies on disposal (18%/28% for residential property).
b) Company Ownership (Onshore or Offshore)
Can provide privacy and facilitate succession planning.
Corporation tax at 25% on rental profits.
Annual Tax on Enveloped Dwellings (ATED) applies for residential property held by companies valued above £500,000, with annual charges scaling up to £269,450 (for £20m+).
Since 2017, offshore companies are fully within UK IHT scope.
c) Trust Ownership
Common for estate planning, especially for families with intergenerational wealth.
Trusts face complex rules: 10-year anniversary charges, entry/exit charges, and potential double taxation.
Still useful for control, asset protection, and international coordination.
d) Partnerships / Co-Ownership
Increasingly used for family investment structures.
Can allow flexibility in allocation of profits and succession planning.
3. Stamp Duty Land Tax (SDLT)
All purchasers pay SDLT on acquisition. The rates are progressive and punitive at the top end:
Up to 12% for properties over £1.5m.
A 3% surcharge for “additional dwellings”.
A further 2% surcharge for non-UK residents.
Example: A £5m property purchased by a non-resident through a company could face SDLT of £741,750 once surcharges are included.
4. Income Tax on Rental Yields
UK residents taxed at marginal rates (20%, 40%, 45%).
Non-residents typically face 20% withholding under the Non-Resident Landlord Scheme, though double-tax treaties may reduce this.
Reliefs: mortgage interest (restricted), management costs, and repairs can offset.
5. Capital Gains Tax (CGT) on Disposal
Since 2015, all non-residents pay CGT on UK residential property.
Rates: 18% (basic rate) or 28% (higher rate).
Non-residents must file within 60 days of disposal.
Rebasing rules may allow gains to be calculated from 2015 or 2019 market values.
6. Inheritance Tax (IHT)
Perhaps the most material risk for HNW families.
Charged at 40% on estates above £325,000 (nil-rate band).
Non-doms are still caught if property is UK-situs.
Mitigation strategies:
Life insurance to cover liability.
Debt structuring (though HMRC now disregards certain offshore loans).
Holding property through excluded property trusts (for genuinely non-doms before becoming deemed domiciled).
7. Scenarios for HNW Families
Scenario 1: Non-UK Resident Buying a London Investment Flat (£3m)
Purchased personally. SDLT of ~£423,750 due.
Rental income subject to 20% UK tax.
On death, subject to 40% IHT unless planning undertaken.
Alternative: an offshore trust pre-UK residency could shelter from future IHT.
Scenario 2: UK Resident, Non-Dom Family Planning Intergenerational Holding (£10m townhouse)
Direct ownership exposes family to 40% IHT.
Corporate ownership triggers ATED charges of £118,050 annually.
Planning route: Use a trust established before deemed domicile, combined with debt financing, to reduce IHT exposure while maintaining control.
Scenario 3: Entrepreneur Acquiring Mixed-Use Property (£15m with retail below, apartments above)
SDLT rates more favourable for mixed-use (non-residential rates, no 3% surcharge).
Corporate vehicle allows profit extraction planning, with corporation tax (25%) potentially more efficient than personal 45%.
Development gains require careful structuring to avoid trading treatment.
8. Practical Considerations Beyond Tax
Financing: Lenders require full due diligence; foreign purchasers may face higher deposit thresholds.
Title & Tenure: Leasehold reform underway, worth monitoring for prime London flats.
Compliance: Non-resident purchasers must register with Companies House if buying through entities.
Disclosure: HMRC’s Trust Registration Service (TRS) requires reporting of many offshore arrangements.
UK property remains an attractive, tangible asset, but without careful structuring, HNW families risk punitive taxation across ownership, income, gains, and inheritance. The most successful strategies are those that weave together tax efficiency, family governance, and cross-border coordination, ensuring the property is not just a residence or investment, but a resilient legacy.
UK Property Purchase: Financial & Legal Checklist
1. Establish Status
Confirm UK residency (Statutory Residence Test)
Clarify domicile (crucial for IHT exposure)
Consider future residence plans (arrival, departure, deemed domicile)
2. Decide Ownership Structure
Personal – straightforward but fully exposed to IHT
Company – potential privacy, succession benefits, but subject to ATED & corporation tax
Trust – useful for estate planning if set up before deemed domicile
Partnership/Co-ownership – flexible, especially for family holdings
3. Calculate Transaction Taxes
Stamp Duty Land Tax (SDLT)
Progressive rates up to 12%
+3% surcharge for additional dwellings
+2% surcharge for non-residents
Model SDLT cost before exchange (can exceed 15% for HNW acquisitions)
4. Plan for Ongoing Taxes
Income tax: UK residents (20–45%), non-residents (20% withholding, treaties may apply)
Corporation tax: 25% on company-held rental income
Allowable reliefs: repairs, management, some financing costs
5. Prepare for Disposal
Capital Gains Tax (CGT): 18%/28% for individuals, 25% for companies
Non-residents also caught (with rebasing options)
File CGT returns within 60 days
6. Address Succession & IHT
IHT at 40% on UK-situs property, regardless of residency
Planning strategies:
Life insurance cover
Excluded property trusts (if genuinely non-dom, set up pre-domicile)
Thoughtful use of debt and cross-border coordination
7. Scenario Planning for HNW Families
Non-UK Resident with London flat: Pre-arrival trust may shelter future IHT
UK Resident Non-Dom family home: Trust + financing to mitigate IHT
Entrepreneur with mixed-use asset: Consider company purchase for favourable SDLT and corporate taxation
8. Don’t Overlook the Practicalities
Financing terms (deposit, lender scrutiny)
Leasehold reform and title issues
Registration with Companies House or HMRC’s Trust Registration Service
Transparency rules (People with Significant Control, Register of Overseas Entities)
