New To Owning a Home in the UK? What You Need To Know About Property Tax

It’s undeniably one of the best feelings in the world. You’ve worked hard for years, saved up for a mortgage, and now you own your own home.

Unfortunately, for many new homeowners, there’s something of a learning curve to go through when it comes to property taxes. In the UK, these cover a range of charges that are added to the ownership, purchase, sale, and occupation of land and buildings, which, depending on where you’ve bought your property, can also vary greatly in price. The system and costs vary across England, Scotland, Wales, and Northern Ireland, so in this article, you’ll be walked through the main types of property-related taxes. It may not seem like fun, but, like most things, it’s good to know!

Council Tax

This guide to property tax starts with the most well-known, which is council tax. In the UK, this is paid by residents to fund local services, such as the collection of waste, schools, and the police.

Council tax applies to most residential and domestic properties and is based on the property’s valuation band, which reflects the home’s market value. Ergo, if your house is worth more, the council tax will be higher. Each property is assigned a band from A (which is the lowest) to H (which is the highest) in England and Scotland. In Wales, this varies from A to I, and the local council will set annual rates for each band. There are discounts and exemptions for certain circumstances. If you’re a single occupant, you’ll likely receive a 25% discount, and some properties, like those assigned to students or armed forces members or former service people, may be fully exempt from council tax. In the north of Ireland, there’s no council tax but domestic rates instead, which are based on the property’s capital value.

Stamp Duty Land Tax (SDLT)

Most people who are looking into buying a home will have heard of Stamp Duty or Stamp Duty Land Tax. This is a tax that’s calculated on the purchase price and applies to both freehold and leasehold properties. In 2025, the residential rates for Stamp Duty Land Tax in England and Northern Ireland are as follows:

0% on properties up to £250,000
5% on the portion from £250,001 to £925,000
10% from £925,001 to £1.5 million
12% above £1.5 million

The government will typically offer First-Time Buyers Relief, meaning that buyers don’t have to pay stamp duty on the £425,000, with reduced rates up to £625,000. If you’re looking to buy a second home or are investing in buy-to-let properties, there’s an additional 5% surcharge since October 31st 2024 in England and Northern Ireland. In Scotland, buyers will pay land and building transaction tax, and in Wales, it’s called land transaction tax. These are structurally similar to stamp duty land tax, but there are different thresholds and rates.

Capital Gains Tax (CGT)

Are you looking to sell your home when it increases in value? If so, you can expect to pay Capital Gains Tax, which is charged only on the increase in your property from the time you bought it.

There’s an exemption, which is known as the Principal Private Residence Relief, which means you don’t have to pay Capital Gains Tax on the sale of your main home. However, for many people, CGT will be required on second homes, rental properties, or land sales.

The CGT rate for individuals is based on their income tax band:

18% for basic rate taxpayers (20% tax)
28% for higher and additional rate taxpayers (40% + tax)

Inheritance Tax (IHT)

When a person passes away, their estate (which usually includes property) may be subject to inheritance tax, based on its value.

The standard Inheritance Tax is 40% on the portion of the estate worth above £325,000. In 2025, the majority of properties fall into this band. There’s a key allowance, known as the Residence Nil Rate Band, introduced in April 2017, which allows an additional £175,000 to be added to this when passing a home onto the direct descendants. For those who are married or in civil partnerships, this can mean a total nil band rate of £500,000. If a person has made gifts during their lifetime, this can also reduce inheritance tax depending on the timing. Gifts that were given more than seven years before the passing are usually exempt following the Seven-Year Rule.

Inheritance Tax is, at the time of writing, the same across England, Scotland, Wales, and Northern Ireland.