Thinking about a new place? Whether you’re buying, renting or already own a home, taxes will show up on your budget. They’re not a mystery if you know the basics, so let’s break down the most common ones in plain English.
When you buy a house, the first tax you’ll meet is Stamp Duty Land Tax (SDLT). It’s a sliding scale – the more you pay for the property, the higher the rate. First‑time buyers get a relief on the first £425,000, which can save you a few thousand pounds.
After the purchase, you’ll start paying council tax. The amount depends on the property’s valuation band (A‑H) and your local council’s rates. Most landlords pass this cost onto tenants, but if you own the home, it’s your responsibility.
If you rent out a property, the rent you receive counts as taxable income. You can deduct legitimate expenses – letting agent fees, maintenance, insurance, and even a portion of mortgage interest. These deductions lower the profit you’re taxed on, which can make renting out a room or an entire house much more affordable.
Don’t forget the £1,000 tax‑free allowance for the first £1,000 of rental income if you’re a casual landlord. Anything above that goes through the regular income tax bands, so know your marginal rate.
Sell a property that isn’t your main home, and you may owe Capital Gains Tax (CGT). The gain is the difference between your selling price and the purchase price, minus allowable costs like estate agent fees and improvements.
Each individual has an annual CGT exemption (£6,000 for 2024‑25). Anything above that is taxed at 18% or 28% depending on your total taxable income. Planning ahead – for example, selling in a low‑income year – can reduce the bill.
When a property passes through an estate, Inheritance Tax (IHT) may apply if the total estate exceeds £325,000. There are reliefs for homes passed to a spouse or a direct descendant, and a £175,000 residence nil‑rate band if the home goes to children or grandchildren.
Using trusts or gifting part of the property while you’re alive can help keep the estate below the threshold, but it’s best to get professional advice before taking action.
1. Keep every receipt for repair work, letting fees and mortgage statements – they’re proof for deductions.
2. Review your council tax band; if you think it’s too high, you can appeal.
3. Use the first‑time buyer relief on SDLT if you qualify – it can shave off a few thousand pounds.
4. Factor in the tax‑free rental allowance before you decide whether to go solo or hire a letting agent.
5. When selling, consider timing the sale for a year when your other income is low to stay in a lower CGT bracket.
Taxes are a regular part of property life, but they don’t have to be a surprise. Knowing which taxes apply, what reliefs you can claim, and how to plan ahead puts you in control of your finances and helps you keep more of your hard‑earned money.
