top of page

UK Tax Guide 2025

What You Need to Know

essential-guide-to-uk-tax_edited.jpg

Income Tax

Income Tax is charged on your earnings from employment, self-employment, pensions, and other income sources.

  • Personal Allowance: £12,570 per year (tax-free income).

  • Tax bands for England, Wales, and Northern Ireland (2025/26):

    • 20% on income up to £37,700 (basic rate)

    • 40% on income from £37,701 to £125,140 (higher rate)

    • 45% on income above £125,140 (additional rate)

  • Scotland has different rates and bands, starting at 19% and going up to 48% for the highest earners.

 

Expenses You Can Deduct from Your Rental Income

Before paying tax on your rental income, you can subtract certain costs that are only for the rental property. These include:

  • Fees you pay to letting agents or property managers

  • Legal and accountant fees related to the rental

  • Insurance for the building and its contents

  • Repairs and maintenance, like fixing a boiler or painting

  • Utility bills and council tax if you pay them for the property

  • Cleaning and gardening costs

  • Ground rent and service charges

Note: You can no longer deduct mortgage interest as an expense, but you get a 20% tax credit on the interest you pay.

Income Tax 2025.png

Stamp Duty Land Tax (SDLT) on Residential Property

SDLT is a tax paid when you buy a residential property in England and Northern Ireland.

  • Rates for a single property purchase (from April 2025):

    • 0% on the first £125,000

    • 2% on the portion from £125,001 to £250,000

    • 5% on the portion from £250,001 to £925,000

    • 10% on the portion from £925,001 to £1.5 million

    • 12% on the portion above £1.5 million

​

  • Additional property: If you already own a residential property, an extra 5% surcharge applies. (To claim this 5% refund, you must have sold your previous main home within 3 years of buying the new property, intended the new property as your main residence at purchase, and neither you nor your spouse/civil partner can still own any part of the previous home).

​

  • Non-UK Residents: you have to pay an extra 2% Stamp Duty Land Tax on top of the normal rates (If you then live in the UK for at least 6 months after you pay the extra 2%, within the first 2 years from when you bought the home, you can claim this 2% back as a rebate).

​

First-Time Buyers’ Relief: A Discount for Your First Home​

If you are buying your very first home, you can get a discount on SDLT, which means you pay less tax.

  • You and anyone you’re buying with must be first-time buyers (never owned a home before anywhere in the world).

  • You must intend to live in the home as your main residence.

  • The property price must be £500,000 or less.

How the relief works:

  • You pay no SDLT on the first £300,000.

  • You pay 5% SDLT on the portion between £300,001 and £500,000.

  • If the property costs more than £500,000, you cannot claim this relief and must pay the normal SDLT rates.

Stamp Duty 2025_edited.jpg

Capital Gains Tax (CGT)

Capital Gains Tax is a tax on the profit when you sell or dispose of an asset that has increased in value.

  • Rates from 30 October 2024:

    • For most assets (excluding residential property), CGT rates rise to 18% for basic rate taxpayers and 24% for higher rate taxpayers.

    • For residential property, rates remain at 18% (basic) and 24% (higher).

    • Business Asset Disposal Relief and Investors’ Relief rates increase from 10% to 14% from 6 April 2025, and then to 18% from 6 April 2026.

  • Who pays? Individuals, trustees, and personal representatives disposing of assets.

  • Special rules: Gains on UK residential property must be reported and paid within 60 days of sale completion.

  • Main Residence Relief: You usually pay no Capital Gains Tax when selling a property that has been your only or main home throughout ownership (or the one you nominate if you have more than one), with relief covering the time you lived there plus the last 9 months of ownership, including certain approved absences like working elsewhere, but if you rented out part or all of the property, only the time it was your main residence is exempt from CGT.

Capital Gain Tax 2025.png

Inheritance Tax (IHT)

Inheritance Tax is charged on the estate (property, money, possessions) of someone who has died or on certain gifts made during their lifetime.

  • New rules from 6 April 2025: If you are a long-term UK resident (resident for 10 out of the last 20 years), your overseas assets may be subject to IHT.

  • Long-term UK resident definition:

    • Resident for 10 consecutive years, or

    • Resident for 10 years within the last 20 years.

  • Exemptions: If you were not domiciled or deemed domiciled in the UK on 30 October 2024, or if you are non-resident in 2025/26, these rules may not apply.

  • This change means more overseas assets could be liable for IHT if you meet the residency criteria.

  • 7-year rule: If you give a gift and live for more than 7 years after, it won’t be taxed for Inheritance Tax, but if you die within 7 years, the gift may be taxed, with less tax the longer you live before passing.

IHT 2025.png

Annual Tax on Enveloped Dwellings (ATED)

ATED is an annual tax mainly for companies that own UK residential properties valued over £500,000.

  • Who pays? Companies, partnerships with corporate partners, and collective investment schemes owning such properties.

  • Valuation: Properties must be revalued every 5 years (next revaluation date 1 April 2027).

  • Chargeable periods: Tax applies annually from 1 April to 31 March.

  • Reliefs and exemptions: Available depending on property use and ownership structure.

  • What counts as a dwelling? A property used or capable of being used as a residence, including gardens and grounds, but excludes hotels, care homes, student halls, etc.

ATED 2025.png

This guide provides a straightforward overview of key UK taxes for 2025. 

​

1 Not all non-UK residents are entitled to the personal allowance. Companies do not receive tax free allowances.
2 SDLT rates apply for single purchases of property by individuals or companies where the property is rented only. Please ask for further details on multiple purchases and company purchases where the property is not rented.
3 A 5% SDLT surcharge applies for purchases of second homes when not replacing your main residence. An additional 2% surcharge for non-UK residents to apply from 1 April 2021 for purchases which exchanged contracts after 10 March 2020. Please ask for further details. 4 Basic rate band for individuals is reduced by other taxable income subject to income tax. Companies do not receive any tax free allowance. High rates can apply for companies if the property is not rented. Please ask for further details.
5 Additional rules apply to married couples and those who pass on a main residence. Please ask for further details.
6ATED applies to companies which hold UK property £500,000+ and exemptions are available if you rent. Please ask for further details.
7 Properties are required to be valued at least once every 5 years. Please ask for further details.

bottom of page