UK property investments are considered to have one of the strongest roots when it comes to investments. These investments stand strong through the storm of economic fluctuations that occur in the global market. Catching the eye of many international investors, it is growing quickly. However, UK properties have caught the most attention from US Investors.
So why not try it out? US Investors can take a step into this world through many routes. Begin by buying a UK property, whether as an individual, a US LLC, or via a UK entity. You can do all this without being a UK resident. Somehow, you do face a few different rules. Previously, we discussed buying property in the UK with a US LLC with its pros and cons. But now we have devised a better route with less bumpiness. Buying UK Property via a UK entity could be a smoother road for you as a beginner. This time, we have a more detailed article on this topic.
Let's investigate this topic and how things would work if you bought UK Property via a UK entity.
Why UK property in the first place?
Many foreigners, especially US citizens, are seen investing in UK Properties, but is it worth the hype it is getting? The answer is yes.
Many investors choose it because of these features:
- Safe Legal System
It enjoys a safe property rights system and an open legal system, which provide safety as an investment criterion for the UK. - Prolonged Demand
Long-term demand for housing in big cities like London, Manchester, and Birmingham offers long-term capital growth and rental yields. - Good Rental Market
Rental markets in other parts of the world with diversifying, wholesome rental appreciation provide secure yields. - No Extreme Constraints on Ownership
There are no bans for foreigners or hindrances to buying properties for foreigners as investors. - A Lot of Scope for Tax Planning
Tax can be handled efficiently with the assistance of structures like SPVS by investors. - Geographic & Currency Diversification
London-centric property provides geographic and currency diversification in global portfolios of a US-biased strategy. - Education & Migration Demand
Robust migrant and international student demand supports rental yields in employment centres and university towns.
Why a UK Entity?
If you're an American investor, you might wonder: Why not just use a US LLC to buy UK property?
Here's the reason: HMRC considers most US LLCs to be opaque for UK tax purposes. That is, the LLC—and not you—is considered the 'legal owner'. You could subsequently lose the benefit of personal tax reliefs and face double taxation: once in the UK and again in the US.
Transparent vs Opaque: What Does It Mean
The UK tax system treats foreign entities like US LLCs either as "transparent" or "opaque." This classification impacts on the way they are taxed in the UK, and understanding this distinction is crucial:
- Transparent
You are taxed as if you owned the income and property yourself. - Opaque
It is taxed, not you—when you receive distributions.
HMRC updated its guidance in December 2023 to remind us again that most US LLCS, including Delaware LLCS, remain opaque, even after the Anson v HMRC case. So, unless your setup is quite unusual, UK tax laws will not pierce through to you personally behind the LLC.
A UK Entity = Less Complicated
A UK Limited Company (SPV) offers:
- Special UK tax treatment
- Corporate reliefs available
- Reduced complexity with HMRC and lenders
Simplified planning of profit extraction with adequate guidance
What About Taxes?
Now that you are considering buying UK properties through your UK ENTITY, you might be worried about the legal formalities and taxes. While the structure offers advantages, it also comes with its own tax rules, reporting requirements, and costs in the UK and the US. You might be familiar with the laws and regulations of the US, but they are different here in the UK.
Let’s break down the key taxes you’ll face when buying, owning, and selling UK property through a UK ENTITY.
Stamp Duty Land Tax (SDLT)
SDLT is a tax you pay when buying property or land in England and Northern Ireland. It may be the first tax you deal with when buying a property in the UK. Being a one-time tax based on the purchase price, SDLT may seem like a lesser tax, but it unveils a different additional rate for non-residents.
The following rates and thresholds apply to the acquisition of residential properties in the UK:
Portion of Property Price | Standard SDLT Rate | +5% Company Surcharge |
|---|---|---|
Up to £125,000 | 0% | 5% |
£125,001 to £250,000 | 2% | 7% |
£250,001 to £925,000 | 5% | 10% |
£925,001 to £1.5 million | 10% | 15% |
Over £1.5 million | 12% | 17% |
Note
- Stamp Duty Land Tax (SDLT) is charged at Flat 17% on residential properties costing more than £500,000 bought by companies.
- Where a company purchases six or more residential properties in a single transaction, the acquisition is subject to non-residential (commercial) SDLT rates rather than the higher residential rates.
If the property is non-residential (Commercial), the following rates will apply:
Chargeable Consideration (Purchase Price) | SDLT Rate |
|---|---|
Up to £150,000 | 0% |
£150,001 to £ £250,000 | 2% |
Above £250,000 | 5% |
Annual Tax on Enveloped Dwellings (ATED)
ATED is a UK tax payable by companies that own a UK residential property worth more than £500,000. The charges payable depend on the valuation of the property, as follows:
Chargeable amounts for 1 April 2025 to 31 March 2026
Property Value | Annual Charge |
|---|---|
More than £500,000 up to £1 million | £4,450 |
More than £1 million up to £2 million | £9,150 |
More than £2 million up to £5 million | £31,050 |
More than £5 million up to £10 million | £72,700 |
More than £10 million up to £20 million | £145,950 |
More than £20 million | £292,350 |
However, residential properties will qualify for relief from ATED charges if they are let out to unconnected third parties commercially, or for property development purposes, property flipping purposes, etc.
Although no tax may be due in these cases, an ATED return must still be filed. Unlike other taxes, ATED is an advanced-looking tax regime. Therefore, the deadline for filing an ATED return is the 30th of April of the relevant year. For instance, the deadline for filing an ATED return for 2025/26 (from 1 April 2025 to 31 March 2026) is 30 April 2025.
Valuation for ATED
For ATED purposes, the property must be valued at relevant dates, which is generally the fifth anniversary of periods starting 1 April 2012, i.e.
- 1 April 2017
- 1 April 2022
For properties purchased after 1 April 2022, the valuation date for the property is the purchase date of the property. Although HMRC does not require a professional valuation, it does seek reasonable valuation figures.
Filing Date
Missing deadlines will cost you much more than you can imagine, so keep these dates in mind.
New Acquisition | Within 30 days of acquisition, if it comes within the regime after 1 April. |
Newly Built Property |
|
Any Other Case | 30th April |
Corporation Tax on Rental Income
You won't be able to dodge corporation tax if you rent out the property in the UK and the property generates profit. Corporation tax is paid on the company's profits after deductions of allowable expenses from the rental income.
Allowable expenses include mortgage interests, repair and maintenance expenses, letting fees, and other costs incurred wholly and exclusively for the business.
Tax rates you will be applying depend on the taxable income after all the deductions you get to exercise.
For the financial year 2023/24 and onwards, the corporation tax rates are as follows:
Rate Band | 2025/26 |
|---|---|
Small Profits Rate - Profits less than £50,000 | 19% |
Main Rate - Profits above £250,000 | 25% |
Where the taxable total profit is between £50,000 and £250,000, the profits will be eligible for the marginal relief as follows:
3/200 * (250,000-Augmented profits) * Taxable Total Profits/Augmented Profits
At the risk of oversimplification, augmented profits are the sum of total taxable profits and the company’s dividend income, exempt from corporation tax.
Although it looks simple on the surface, the calculation of corporation tax can get tricky. Below, we have simplified three scenarios.
For earnings or profit below £50,000, you use the 19% tax rate.
Profit = 25,000
Rate = 19%
Tax payable = 25,000 X 19% = 4,750
For earnings above £250’000, you use the 25 % tax rate
Profit = £300,000
Rate = 25%
Tax payable = 300,000 X 25% = £75,000
For earnings between £50,000 and £250,000.
Taxable total profit = £200,000
Tax payable
Method 1 | Method 2 | ||
|---|---|---|---|
19% on the first 50,000 | 9,500.00 | 25% on taxable total profit (£200,000) | 50,000.00 |
26.5% on the excess | 39,750.00 | Less: Marginal relief using the formula above | (750) |
Corporation Tax payable | 49,250.00 | Cell | 49,250.00 |
Please note that we have assumed that the taxable total profits are equal to the augmented earnings in the above example. In cases other than that, the two methods would give different figures, and you can only use Method 2.
Filing Deadline
The filing deadline for Corporation tax is 12 months after the end of the accounting period. For example, for the year ended 31 December 2024, the filing deadline is 31 December 2025.
Deadline for Paying Corporation Tax
For small companies, the corporation tax is due 9 months & 1 day after the end of the chargeable accounting period. For example, the corporation tax for the year ended 31 December 2024 is due on 1 October 2025.
The corporation tax must be paid on an instalment basis for large companies. Companies with profits of more than £1.5 million are counted as large companies.
In addition to the Corporation tax return filing, companies must submit their annual accounts to the Companies House within 9 months from the end of the accounting period.
Non-Resident Capital Gains Tax on Direct & Indirect Disposals
Non-UK residents can dispose of the UK property in two ways:
- Selling the property directly or
- Selling shares in the company that holds the property
Either way, the disposal would be subject to the UK's Capital Gains Tax (CGT). CGT is a tax payable when certain assets are sold at a gain.
Disposing of Properties by the UK Entity
When a company makes a chargeable gain on the disposal of its assets, the gain will be subject to corporation tax. Unlike individuals, companies are not entitled to the annual exempt amount. However, the property may be eligible for the indexation allowance if acquired before 2018. The corporation tax on the chargeable gain is calculated as follows:
Disposal Proceeds | X |
|---|---|
Less: Incidental disposal costs | (X) |
Net proceeds | X |
Less: Allowable expenditure (as for Individuals) | (X) |
Unindexed gain | X |
Less: Indexation allowance | (X) |
Chargeable gain/ (allowable loss) | X/(X) |
Corporation Tax at the relevant rates | X |
The final gain is chargeable, which is taxed as income, at the corporation tax rates.
Disposal of Shares in the Company
You don't always need to find a buyer for the property; instead, you may find the parties interested in purchasing the shares in the company that holds the property.
When a non-UK resident sells shares in a company that derives at least 75% of its asset value from UK land, and the person holds at least a 25% ownership stake, the disposal is classified as an indirect disposal of UK property.
When such a transaction occurs, the sale will be subject to Non-Resident Capital Gains Tax Return (NRCGT) rules, and the taxpayer will be obligated to file the return and pay the tax due within 60 days of the completion of the share transfer.
For transactions post 31 October 2024, the CGT rates for the disposal of all assets are set at 18% up to the basic rate band, and 24% on the remaining gain.
However, if the transaction took place before that, the rates would be different; indirect disposal of residential properties would be subject to 18% and 24%, whereas commercial property would be taxed at 10% and 20%.
Withdrawing Profits (Dividends/Distributions)
Profits earned in the UK can't be directly shifted to your US account without much effort. You'll need to draw them out through one of the traditional channels:
- Paying yourself a dividend – from the UK company to you, individually, or your US LLC
- Paying a director's salary or fee
Both options have tax consequences, which are explained in our guide to, "Transferring Money out of a Limited Company."
So, you do need to think sensibly about how you set things up. Combined tax planning on the UK and US sides is necessary if you don't wish to pay excessive tax and keep things running.
Tax Summary
Conclusion
Getting It Right from the Start!
Investing in UK real estate through a UK ENTITY is a smart step for American investors—but only with vision and transparency. From understanding tax realities to facilitating cooperation on both sides of the Atlantic, every step matters. The structure is versatile, with rental market exposure, high demand, and growth potential for the long term, but demands attention to planning to avoid expensive errors.
Whether moving new or reorganising your current setup, always do it with intent, and seek good quality tax and legal assistance in advance. The UK market is open to worldwide investors, but the rub is how much harmony you can strike among your structure, objectives, and requirements.
Need expert advice on buying UK property via UK Entity as an US investor?
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