Owning property in London means dealing with several separate taxes rather than one bill. Council tax is charged annually by your borough and funds local services. Stamp Duty Land Tax is a one-off payment to HMRC when you buy. Selling can trigger capital gains tax, passing a property on through an estate can attract inheritance tax at 40%, and holding a home through a company brings a yearly charge of its own. The main London property taxes, their rates, and the deadlines that trip people up are set out below.
Council Tax
Council tax is the annual charge you pay to your local borough for services like policing, fire, waste collection, and social care. It was established under the Local Government Finance Act 1992 and is run individually by each of the 32 London boroughs and the City of London.1Legislation.gov.uk. Local Government Finance Act 1992 Two things drive your bill: which valuation band your property sits in, and which borough you live in.
Every home in England is assigned to one of eight bands, A through H, based on what it would have sold for on 1 April 1991. Band A covers properties valued up to £40,000 at that date; Band H covers those above £320,000. The Valuation Office Agency sets these bands and they do not move with the market. A band only changes if the property is structurally altered or sold after such alterations.2GOV.UK. How Domestic Properties Are Assessed for Council Tax Bands Band D is the benchmark used when comparing rates across councils.
Your bill has two parts. The larger share goes to your borough. On top of that, the Mayor of London adds a precept for the Greater London Authority. For 2026–27, the Band D GLA precept is £510.51 across the 32 boroughs, including £334.13 for the Mayor’s Office for Policing and Crime. The City of London pays a lower precept of £176.38 because it runs its own police force.3London City Hall. MD3472 Approval of 2026-27 Council Tax and Precepts The borough element varies significantly, so where you live in London matters as much as the size of the home.
The resident normally pays, not the landlord. The main exception is houses in multiple occupation, where tenants rent individual rooms rather than the whole property; the landlord is liable there.4GOV.UK. Council Tax – Who Has to Pay When you move in, tell your borough’s council tax department so they can open your account. Most boroughs let you pay by monthly direct debit over ten or twelve instalments.5GOV.UK. Start Paying Council Tax
Discounts, Exemptions, and Band Challenges
If you are the only adult in the property, you automatically get a 25% discount. If every resident counts as a “disregarded person” for council tax purposes, the discount rises to 50%.4GOV.UK. Council Tax – Who Has to Pay Full-time students and people with severe mental impairments are among those disregarded, and a household made up entirely of full-time students pays nothing.
Council Tax Reduction, sometimes called Council Tax Support, helps if you have a low income. Each borough runs its own scheme, so the amount varies across London.6Citizens Advice. Check if You Can Pay Less Council Tax Properties left empty because the occupant has moved into a care home or hospital may also be exempt.
If you think your band is wrong, you can ask the Valuation Office Agency to review it. There are two routes: a formal “proposal” if you have a legal right to challenge (for example, you have just moved in or the property has been altered), and an informal “band review” if you simply think the band is wrong.7GOV.UK. Challenge Your Council Tax Band Check your band and neighbouring properties on the VOA’s online portal first. A review can move you down, confirm the band, or move you up, so be sure the comparison supports you before you file.
Stamp Duty Land Tax When You Buy
Buy residential property in London and you pay Stamp Duty Land Tax to HMRC. The tax works on a progressive, slice-based system: each rate applies only to the portion of the price within that band.
Standard rates for a single residential property:8GOV.UK. Stamp Duty Land Tax – Residential Property Rates
- Up to £125,000: 0%
- £125,001 to £250,000: 2%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Above £1.5 million: 12%
On a £500,000 purchase, you pay nothing on the first £125,000, 2% on the next £125,000 (£2,500), and 5% on the remaining £250,000 (£12,500). Total: £15,000.
First-Time Buyer Relief
If you and anyone you buy with have never owned a residential property, you pay no stamp duty on the first £300,000 and 5% on the portion from £300,001 to £500,000. The purchase price must not exceed £500,000; above that, you pay the standard rates on the entire amount with no relief.8GOV.UK. Stamp Duty Land Tax – Residential Property Rates That cap is tight for London, where the average flat frequently exceeds it. Many outer-borough buyers can still benefit; buyers in central London often cannot.
Additional Property and Non-Resident Surcharges
Buying a second home or an investment property when you already own residential property elsewhere adds a 5% surcharge on top of the standard rates.8GOV.UK. Stamp Duty Land Tax – Residential Property Rates Using the higher-rate schedule from 1 April 2025, combined rates start at 5% on the first £125,000 and climb to 17% above £1.5 million.9HM Revenue & Customs. Higher Rates of Stamp Duty Land Tax For a buy-to-let investor on a £500,000 property, the total roughly doubles compared with someone buying their only home.
Non-UK residents pay a further 2% on top of whatever other rates apply.9HM Revenue & Customs. Higher Rates of Stamp Duty Land Tax The residency test looks at whether you were physically present in the UK for at least 183 days during a roughly two-year window around the purchase. Because the stamp duty return is due within 14 days of completion, many overseas buyers must pay the surcharge upfront and later amend the return to claim a refund if they meet the test in time.10GOV.UK. SDLT – Increased Rates for Non-Resident Transactions
Filing and Late Penalties
Your solicitor or conveyancer normally files the return, but the legal responsibility is yours.11HM Revenue & Customs. Stamp Duty Land Tax Online and Paper Returns The return must reach HMRC within 14 days of the effective date, which is usually completion.12HM Revenue & Customs. Changes to the SDLT Filing and Payment Time Limits Miss that and there are automatic penalties: £100 if you are up to three months late, £200 after three months. Still nothing filed after 12 months and HMRC can add a tax-based penalty of up to the full duty owed. Interest also runs on late payments at 7.75% as of January 2026.13GOV.UK. HMRC Interest Rates for Late and Early Payments
Capital Gains Tax When You Sell
Sell a London property for more than you paid and the profit may be taxable. “May,” because Private Residence Relief usually wipes out the bill on your main home, covering the whole period you lived there. What catches people out is second properties, former homes turned into rentals, and inherited properties they never occupied.
Where a gain is taxable, residential rates are 18% for basic-rate taxpayers and 24% for higher or additional-rate taxpayers.14GOV.UK. Capital Gains Tax – What You Pay It On, Rates and Allowances If your income plus gain straddles the basic-rate threshold, the split rate applies. Everyone gets an annual tax-free allowance of £3,000 for 2025–26, down from £6,000 two years ago.15GOV.UK. Capital Gains Tax Rates and Allowances
The reporting deadline is short. You must report the disposal and pay any tax within 60 days of completion.16GOV.UK. Report and Pay Your Capital Gains Tax It is a separate return from your annual self-assessment and catches many sellers off guard.
Inheritance Tax on London Estates
London prices mean inheritance tax hits a far larger share of estates here than elsewhere. The standard nil-rate band is £325,000 per person, frozen at that level since 2009 and fixed there by legislation until at least April 2031.17GOV.UK. Inheritance Tax Thresholds Anything above is taxed at 40%.18GOV.UK. How Inheritance Tax Works
A further allowance, the Residence Nil-Rate Band, adds up to £175,000 per person when you leave your main home to direct descendants such as children or grandchildren. That gives a single homeowner a potential combined threshold of £500,000, or £1 million for a married couple or civil partners who can transfer unused allowances to the survivor.17GOV.UK. Inheritance Tax Thresholds The catch is tapering: for estates worth more than £2 million, the Residence Nil-Rate Band is reduced by £1 for every £2 above that threshold, and it disappears entirely at £2.35 million. In London, once the home is added to other assets, many estates cross that £2 million line and lose the extra allowance.
Annual Tax on Enveloped Dwellings
If a residential property worth more than £500,000 is held by a company, a partnership with a corporate member, or a similar non-natural entity, the owner faces the Annual Tax on Enveloped Dwellings. This is a recurring yearly charge aimed at discouraging holding homes through corporate structures for tax reasons. Individual owners are outside its scope. The annual amounts for 2026–27:19GOV.UK. Annual Tax on Enveloped Dwellings
- £500,001 to £1 million: £4,600
- £1 million to £2 million: £9,450
- £2 million to £5 million: £32,200
- £5 million to £10 million: £75,450
- £10 million to £20 million: £151,450
- Above £20 million: £303,450
Returns must be filed at the start of each chargeable period, and HMRC charges penalties and interest for late submissions. Reliefs exist for genuine rental businesses, properties open to the public, and dwellings held by developers for resale, but you still need to file a return to claim any relief, even where it reduces the charge to zero.