Introduction

Owners of UK property can incur a variety of tax charges and may have related reporting requirements. This note summarises the tax position and reporting requirements in relation to the Annual Tax on Enveloped Dwellings (ATED), rental income received by non-UK resident landlords and on disposal of UK property. The tax and reporting position varies depending on the profile of the person(s) who owns the property, the property’s value, the use to which the property is put and the date a disposal occurs.   

We can assist you with understanding the tax position and compliance with relevant reporting responsibilities. Other taxes and related reporting requirements may apply, in addition to those set out in this note. 

In some cases, UK resident individuals may be taxable on income received or gains made by non-UK residents. For example, shareholders in non-UK resident companies and settlors or beneficiaries of non-UK resident trusts. This note does not comment on this point: please contact us for advice if this is or may be relevant. 

Annual Tax on Enveloped Dwellings (ATED) 

ATED is a tax charge, payable every year in advance, which applies annually to ‘high-value’ UK residential properties owned by non-natural persons, which includes companies and foreign equivalents. ATED is not payable where trustees own property directly, nor is it payable by individuals who own property personally. It applies regardless of where the non-natural person that owns the property is resident. 

ATED applies to properties worth more than £500,000. The amount of ATED payable depends on the value band into which the property falls. For the five years commencing on 1 April 2023, the value of a property for ATED purposes is the property’s value on 1 April 2022, or on purchase, if later. Revaluations are required every five years. An interim revaluation may be required if a ‘substantial’ acquisition or disposal of an interest in the property occurs. This, broadly, means an acquisition or disposal of an interest in the property for £40,000 or more, or a transfer of an interest worth this amount if the transfer occurs by way of gift. 

Relief from ATED is available in some cases, including for qualifying property rental or development businesses. 

An ATED return(s) must be submitted annually in respect of properties within the scope of ATED. Where relief is available, it must be claimed annually. 

A return may be required within 30 days of acquisition of a new property. Returns must generally be filed and any tax due paid by 30 April at the beginning of the ATED period (1 April – 31 March) for properties that are already owned on 1 April. A further or amended return may be required if the ATED position changes. The filing deadline may be as short as 30 days from the event that triggered the additional reporting requirement. 

Non-Resident Landlord (NRL) scheme

The NRL scheme may apply where a property is let by a person whose usual place of abode is outside the UK. This often, but not always, corresponds to being non-UK resident for tax purposes. It can apply to individuals, trusts and companies that let property, regardless of whether or not ATED is payable. 

If the NRL scheme applies, 20% income tax should be deducted at source by the tenant or letting agent. The tenant or agent may deduct certain expenses they have paid on the landlord’s behalf from the gross rent when calculating the tax due. 

Alternatively, the landlord may instead be able to register with HMRC under the NRL scheme to receive rents gross. Annual tax returns must then be completed to declare the tax due. Individuals and trustees must generally file returns by the 31 January following the end of the tax year (which is 5 April). Companies are within the scope of corporation tax and so if the NRL is a company corporate tax return filing deadlines apply.  

Tax on property gains 

The tax position on disposal of UK property varies depending on the circumstances involved. Broadly: 

• Individuals, regardless of residence, pay 18% or 28% Capital Gains Tax (CGT) on gains realised in excess of the annual exemption (£6,000 for 2023/24).
• Trustees, regardless of residence, pay 28% CGT on gains realised in excess of the trustees’ annual exemption (£3,000 for 2023/24).
• Non-UK resident individuals and trustees are usually only taxable on the uplift in value of UK residential properties from 5 April 2015 and UK non-residential properties from 5 April 2019. Tax charges may also apply on gains made on ‘indirect disposals’ of UK land which (broadly) involves disposals of interests in companies (such as shares) by non UK residents with a substantial (25% or more) interest in a company which derives at least 75% of its gross asset value from UK land. 
• Gains realised by individuals or trustees may be reduced, potentially to nil, where a property is used as an individual’s main residence, including as the main residence of a trust beneficiary. 
• Companies pay between 19% and 25% corporation tax on UK property gains.  
• Non-UK resident companies are typically only taxable on the uplift in value of UK residential property from 5 April 2015 and on the uplift in value from 5 April 2019 for UK non-residential properties and potentially on ‘indirect disposals’ of UK land (broadly, as explained for non-UK resident individuals and trustees). 

Reporting requirements on disposal of UK property

Various reporting requirements may apply on disposal of UK property. Notably: 

• Non-UK resident individuals and trustees must normally file a return and make a CGT payment on account within 60 days of disposal of a UK property or an indirect disposal of UK land. A Self-Assessment tax return may also need to be completed by the 31 January following the end of the tax year of disposal (or 31 October if filing on paper). 
• UK resident individuals and trustees must normally file a return within 60 days of disposal of a UK residential property. A Self-Assessment tax return may also or instead need to be completed by the 31 January following the end of the tax year of disposal (or 31 October if filing on paper). Disposals other than of UK residential property are not within the 60 day reporting regime but may need to be included on a Self-Assessment tax return. 
• Companies may need to include the disposal on their company tax return. 

How can we help? 

We can assist with understanding the tax position of UK property and compliance with reporting requirements. In particular: 

• We can advise on whether or not a property is within the scope of ATED or the NRL scheme, prepare annual returns on an ongoing basis and, for the NRL scheme, prepare applications to receive rents gross. 
• On disposal we can assist you with calculating the taxable gain and with preparation of the required return(s). 
• While in this note we have focussed on the tax position for properties which are already owned, it is essential that advice is taken prior to purchasing a property and any reporting requirements complied with. Notably, companies may need to file an ATED return within 30 days of acquisition of a UK residential property. We can also assist with this reporting requirement.