RESIDENTIAL PROPERTY TAX STRATEGY IN THE UK IN 2023 [UPDATED] 

In recent years, the UK government has adopted laws that have significantly altered the taxation of UK residential property tax protest services, notably that acquired or held by businesses or other non-natural persons. 

The Annual Tax on Enveloped Dwellings (ATED) went into effect on April 1, 2013, for residential properties worth more than £2 million held by companies and other non-natural persons. The 15 percent rate of Stamp Duty Land Tax (SDLT) was introduced in the 2012 Budget for acquisitions of single dwellings valued at more than £2 million held by companies and certain other non-natural persons. At the same time, with effect from April 6, 2013, UK capital gains tax (CGT) was extended to such property disposals. With effect from April 1, 2015, the 2014 Budget expanded the scope of applicability of ATED to include homes worth £1 million or more and those worth £500,000 or more with effect from April 1, 2016. 

A BILL CAN BE APPEALED 

If you have any of the following concerns, contact your local council right away. 

• Your home should not be charged council tax  
• The bills are being sent to the incorrect address,  
• The amount being charged is incorrect, 
• The council has not reduced the bill even though a disabled person lives there.  

You cannot appeal simply because you believe your council tax bill is too high. 

HOW TO FILE A TAX BILL APPEAL 

Write to your city council and explain why you believe your bill is incorrect. The council committee will either decide that the legislation is: 

• Incorrect and send you a new one. 

• It is correct and explains why. 

If the council determines that your bill is incorrect, you must pay the amounts mentioned on your original invoice until the replacement bill arrives. The council has been given two months to respond. 

IF YOU DISAGREE WITH THE COUNCIL’S DECISION, YOU CAN APPEAL IT: 

You can appeal to the Valuation Tribunal if you believe the council’s judgment is incorrect or if you have not received a response within two months. The VOA does not influence the Valuation Tribunal. It’s a free service, but you must cover your expenses. 

It would help if you made an internal appeal: 

• After two months, the council will inform you of its decision. 
• Four months after your initial letter to the council (if you have not had a response) 

If you cannot apply on time due to circumstances beyond your control, you may be able to have the deadline extended. 

EXEMPTIONS: 

The following items are exempt from the 15% SDLT (Stamp Duty land Tax) rate, the ATED (The Annual Tax on Enveloped Dwellings) charge, and the ATED-related CGT (capital gains tax) charge: 

• Properties bought as part of a property development business. 
• Let out as part of a property rental business where the property is rented to third parties on a commercial basis (in most situations, this will exempt properties acquired as “buy-to-lets”). 

• Farmhouses and homes owned by trading enterprises for employees’ use. 
•  

RATES OF INHERITANCE TAX: 

The usual rate of inheritance tax is 40%. It only applies to the portion of your estate that exceeds the threshold. 

Example Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000). 

Inheritance Tax is a tax on a deceased person’s estate (their property, money, and possessions). 

If either of the following applies, there is usually no Inheritance Tax to pay: 

• If your estate is worth less than £325,000 
• You can leave everything beyond that amount to your spouse, civil partner, a charity, or a community amateur sports club. 

FILING REQUIREMENTS: 

ATED (The Annual Tax on Enveloped Dwellings) returns are due on the 30th of April each year, well ahead of the tax year. If the property’s status changes later (for example, a relief begins or ends partway through the year), an amendment can be filed together with any tax adjustment paid or returned. Even if there will be no reduced tax charge, entities that qualify for one of the above ATED exemptions (e.g., the rental or property development exemptions) will still have to file an annual ATED Relief Declaration Return to claim the relief. 

Organizing Non-UK Residents’ New Purchases: 

The use of a corporation as a beneficial owner for new residential property purchases is unlikely to be viable unless the company qualifies for one of the ATED exemptions. When selecting a property ownership structure, it is critical to determine the investor’s objectives. The following are the primary non-tax factors in our experience: 

• Ultimate beneficial owner confidentiality/non-disclosure 
• Protection of assets and succession planning (particularly when combined with a trust) 

Alternatives to a company’s beneficial ownership include: 

• Personal Ownership: 

Property owned by one or more individuals is not generally subject to the ATED regime. However, the owners’ names will appear directly on the UK Land Registry, which is publicly accessible. 

From 6 April 2017, the property will be subject to UK inheritance tax at a rate of 40% on death. 

A non-UK resident individual disposes of a UK residential property. Any capital gain arising after 6 April 2015 will be chargeable to UK CGT at a top rate of 28%. 

Profits derived from UK rental receipts will be taxable in the UK at an income tax rate of up to 45%, depending on the profit level. However, if the property is being rented to third parties, it may be preferable to hold it through a non-resident company that qualifies for an exemption from ATED. The tax rate on the rental profits would then be capped at 20%. 

• Ownership through a Nominee Entity: 

For an individual wishing to maintain confidentiality concerning the beneficial ownership of residential property, a property can be purchased through a nominee company. 

The main advantages of this approach are: 

The company’s name will appear as the legal owner at the Land Registry, so there will be no publicly available record of the beneficial ownership of the property. Note that there are proposals to require individual ultimate beneficial owners to be disclosed at the Land Registry, which would render a nominee owner ineffective for confidentiality purposes. 

The 15% Stamp Duty Land Tax rate, the ATED and ATED-related CGT charges will not apply to the company because it is purchasing the property in a nominee capacity: and the same income, capital gains, and inheritance tax analysis will apply for personal ownership. 

• Ownership through a Partnership 

If the property is purchased through a partnership with no corporate member, each partner will be treated as owning a proportion of the property following their capital share. Therefore, the property will not be within the ATED regime (unless the partnership is a collective investment scheme). 

The partnership will appear as the legal owner at the Land Registry, so there will be no publicly available record of the beneficial owner of the property (but see above about proposed disclosure requirements). 

The same income, capital gains, and inheritance tax analysis will apply for personal ownership as the partners are deemed to personally own their share of the property. 

• Ownership through a non-UK Resident Trust 

The general advantages of trust ownership are well known, but the main benefit is asset protection. However, property held directly by a trust is not within the ATED regime, which means beliefs still have a part to play in UK property structuring.