Property in the UK is highest in the world. Whether you have your own property where you are currently staying or got it is as a gift, or even passed on due to inheritance, you have to pay some or other kind of tax for keeping it in your possession. The value is so much that it contributes almost 37 percent of the total GDP of the United Kingdom. While most of the people express their discomfort at parting with such a high amount, the system continues. There are quite a few contributing factors for the exorbitant amount of tax rate. Let us look into some of the taxes that the landlords, real estate agents, and the owners have to pay to keep the property in their name.
There are basically three types of tax head that require being paid, namely Central Government tax, Developed National Government tax and the Local Government tax. These are then sub-divided into various categories. Some are direct taxes and others are an indirect tax. These can be paid on a monthly or on a yearly basis. The total property tax contributes more than 10 percent of the total tax collected as per Organization for Economic Co-operation and Development.
The property tax is levied on the property owner, landlord and the real estate. Anybody with a recurring income from any of his properties as a rental is liable to pay the taxes. The tax liable to be paid is calculated according to the property type. If someone rents more than one property, every property will be treated as individual property and the amount will be calculated accordingly. The tax is applicable to the government treat the rental as an income source and levies income tax on them. It is calculated on the basis of total profit incurred by the individual after paying for the yearly maintenance. For anyone who is a non-resident of UK but owns a property and provides it for rental, the rules are different.
Another type of tax named as Capital Gain Tax is then levied and is calculated differently. This can be up to 10, 20 or 40 per cent according to the income bracket. This tax is paid annually. The non-residents are generally not liable to pay this tax but are liable if the property is used for professional rentals. After deducting these two types of taxes, the individual has to pay Value Added Tax or VAT which is around 17.5 per cent.
One of the most complex taxes that have to be paid for any real estate owner or landlord is Inheritance Tax, which makes the next successor according to the official will as its owner. Not paying could lead to a tax burden on the subsequent owner. The other types of taxes that need to be paid are in the form of stamp duty, any excise, and the local municipal tax. There are various slabs which tabulate the general tax rates and the liability of any individual against buying, selling or inherit different properties in the different region. The second home or holiday home can though save you almost 50 percent of tax on them.