Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I’m trying to buy either a house or an apartment in London. How are taxes determined for each there?
A: “The difference is pretty minimal,” said Andrew Goldstone, a partner at Mishcon Private, an arm of the London-based law firm Mishcon de Reya.
Stamp Duty Land Tax, paid when the property is purchased, is “exactly the same if you buy a house with four walls and a garden or an apartment,” Mr. Goldstone said. The tax is a percentage of the price of homes more than £125,000 (US$170,000), which starts at 2% of the amount over £125,000 and goes up from there, Mansion Global previously reported.
The Council Tax is another fee paid by the occupier of the home. Whether it’s a home or apartment is not taken into consideration, but if an apartment owner rents out the space, the renter would pay the tax.
“The basic sum payable in council tax is determined by the value of the dwelling, which is placed in one of eight different valuation bands which determine the amount of annual tax,” according to Alan Murdie, an attorney and the director of the U.K.’s Council Tax Legal Services.
Because the tax is partially determined by location, it can vary widely.
“Someone could end up paying less Council Tax on a £20 million home (US$26.3 million) in Central London that someone in the outer suburbs who owns a £300,000 home,” Mr. Goldstone said.
Areas are broken down by bands, from A through H. For those living in the City of Westminster, in Central London, the total council tax per year is between £473.66 (US$629) in band A and £1,421 (US$1,887) in band H, according to Westminster City Council website. That includes payments to both the Westminster City Council and the Greater London Authority.
To the east, in Bexley, the annual tax ranges from £1,058.69 (US$1,405) to £3,176.08 (US$4,218), according to the borough’s site.
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