2022 marks a shift to pre-covid norms for the UK property market for the first time in a full two years, and for property owners and potential buyers this means there’s more to take note of and prepare for going forward. One major responsibility that property owners need to adjust for is that of UK property tax. Read on to see what owners need to know about their taxes this year.
What is Stamp Duty Land tax?
In a nutshell, stamp duty tax is paid on properties over a certain price in England and Northern Ireland. During the coronavirus pandemic, stamp duty benchmarks across the UK were temporarily increased, meaning less people had to pay and spurring a boom in the property market. As of March 2022, the amount of stamp duty you will pay to Her Majesty’s Revenue and Customs is:
-0% up to £125,000
-2% between £125,001 and £250,000
-5% between £250,001 and £925,000
-10% between £925,001 £1,500,000
-12% on anything over £1,500,001
Additionally, if you are buying a property from overseas there is a further 2% stamp duty surcharge applicable, on top of a 3% surcharge for any transaction where, upon completion, the buyer would own two or more properties.
What is Capital Gains Tax?
Capital gains tax is, wait for it, the tax on gains received when you sell or dispose of an asset like property. In very simple terms the total gain, or profit, is calculated by subtracting the sale value from the original purchase value. The rules for capital gains tax were recently altered for
British expats and UK non-resident property owners. Before the 6th of April 2015 you were not taxed in the UK on gains made when you sold UK property if you were a non-UK resident for five consecutive UK tax years. Since that date however, if you’re a British expat who owns property in the UK, you have to pay capital gains tax if you sell your property for a gain.
The new tax applies on the sale of all UK residential property that’s defined as “property used or suitable for use as a dwelling.” This means it applies whether or not anyone is living in your property.
Capital gains tax is calculated differently depending on your rate of income tax applicable.
If you’re a higher or additional rate taxpayer you’ll pay 28% on your gains from residential property and 20% on your gains from other chargeable assets. If you pay basic rate income tax the rate you pay depends on the size of your gain, your taxable income, and whether your gain is from residential property or other assets. Capital gains tax for residential property transactions can also now be paid within 60 days, versus the previously existing 30 day payment period.
What is Income Tax?
This tax is calculated based on your earnings and income. For the 2022/23 UK tax year, all individuals are permitted a personal allowance of £12,570, making any income below this level tax-exempt. UK tax rates are the same for everyone regardless of their residency status but it dictates what sources of income must be included in your return. Anyone who is a UK resident for tax purposes is taxed on their worldwide income, with some allowances to prevent double taxation from certain countries. Non-UK residents, on the other hand, only pay on income earned within the UK. Regardless of your residency, it is a requirement to complete a tax return every year, and there are penalties applicable if you are late.
With a wide range of developments, information and updates to keep track of, navigating UK property tax can be daunting. Contact Tailor my Property today and consult with our expertise network of tax and property professionals.