Americans buying a UK home – what are the UK tax considerations?

For Americans relocating to the UK, purchasing a main residence is a major milestone.  While the UK offers a relatively stable property market and attractive lifestyle options, it is important to understand the tax implications at an early stage. The relevant taxes when buying a new home are land tax, capital gains tax, and inheritance tax and it’s important to note that the considerations when buying an investment property or commercial property are different.

It is always important to consider the UK tax implications on your acquisition, ownership and disposal of any interest in property situated in the UK. Simple and effective advice given at the earliest opportunity can help ensure American citizens moving to the UK minimise their tax exposure and protect their interests while maximising the benefits of property ownership.

Land Tax

When an individual purchases a property in the UK, irrespective of tax residency, they are liable to pay a form of land tax on the value of that property.

Taking Scotland as an example, Land and Buildings Transaction Tax (LBTT) would be charged.  LBTT is a progressive tax with slices of the purchase price being subject to tax at different rates as follows:

For example, if an individual buys a home in Scotland for say £800,000, the “standard” LBTT would be £54,350. If, however, that individual owned an interest in another residential property (whether in the UK or anywhere in the world) a second home surcharge called the Additional Dwelling Supplement (ADS) would also apply. ADS is charged currently at a flat rate of 8% on the value so the ADS would be £64,000, giving total LBTT of £118,350.

Before buying a property, it is important to consider the family’s overall property ownership position in case there are restructuring opportunities to improve the tax position.  This can involve disposing of properties to family members or using trusts.

There are similar, but not identical, considerations when purchasing a family home in England, Wales and Northern Ireland.

Capital Gains Tax

Capital Gains Tax (CGT) is of relevance when an individual sells or gifts their property. The broad rule is that where a property is disposed of at a gain, CGT is charged on that gain currently at up to a rate of 24%.

However, where the property in question is the individual’s qualifying main residence, the gain can typically be exempted in part or in full by Private Residence Relief (PRR). There are special rules which allow periods of absence from the property to qualify for PPR under certain ‘deemed occupation’ provisions, which may need to be checked. The availability of PPR relief will also be dependent on whether the individual has one or more family homes.

Inheritance Tax

Inheritance tax (IHT) is a tax on the value of an individual’s UK estate at the time of their death, including any gifts within seven years of their death.

From April 2025, where an individual has been tax resident in the UK for 10 of the last 20 years, they are deemed to be a Long Term Resident (LTR), and the value of their worldwide assets are subject to IHT. For a non-LTR, only the value of their assets situated in the UK are subject to IHT.

The value of an individual’s estate over the available IHT nil rate band (currently frozen at £325,000) will potentially be subject to IHT at 40%, subject to the availability of reliefs and exemptions.  Where an interest in a family home forms part of the estate, where certain conditions are met, the nil rate band can be extended by a further £175,000.

How we can help

Our Tax Team is experienced in navigating this complex and evolving area and can offer tailored advice to help protect your interests. Please contact us here or email nick.dobbs@andersonstrathern.co.uk or alison.pryde@andersonstrathern.co.uk if you have any questions on this topic.