What is property tax?

Property tax is the catch-all term for a whole range of different laws, regulations and court cases that have evolved over the years for landlords and developers.

The property tax someone pays depends on the type of property business they run – see Deciding what sort of property business you run [Opens in new window]

Some of the taxes are paid on buying a home. Others are paid on rents received or triggered by selling part or all of the property.

Here’s a list of the main property taxes and why they are paid:

Stamp Duty

The correct term is Stamp Duty Land Tax (SDLT) and the tax is paid on buying a home.

The rate of tax depends on the value of the property – the more expensive the home, the more the stamp duty due.

From time to time, the government announces a stamp duty ‘holiday’ to encourage first-time buyers.

Your conveyancer will calculate the stamp duty you need to pay and will fill in the forms for you as part of the legal completion process.

Income tax

Landlords and holiday home owners pay income tax on rental profits, while property developers pay the tax on the profits they make for selling a home.

Capital gains tax

Often called CGT, capital gains tax is paid by landlords and holiday home owners on the ‘gain’ they make from disposing of a property.

A disposal is giving, selling or otherwise transferring some or all of a property to someone else.

Various CGT reliefs can lower the amount of tax paid under special circumstances

Corporation tax

Corporation tax or ‘CT’ takes the place of income tax or CGT if the property owner is a limited company.

VAT

Residential property is largely exempt from VAT, although some reduced rate schemes offer relief under special circumstances, like bringing an industrial building to the market as a new home or converting accommodation over a shop in to a flat.

Who pays property tax?

The individuals who own a property pay the tax –  See Who pays property tax? [Opens in new window]

 

 

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