UK: New UK Property Taxes Become A Reality

Last Updated: 28 March 2013
Article by Lyndsey L.M. West


The new property taxes affecting high value residential dwellings have been in the pipeline for 12 months - but become a reality from the beginning of April 2013. The new taxes affect properties worth over £2m which are owned by UK or non-UK resident companies (as well as certain other kinds of entities).1

First, the annual residential property tax ("ARPT") will be payable each year. It applies to valuable properties which on 1 April 2013 (the starting date of the new tax) are owned by companies The amount of tax will depend on the value of the property - see the table below.

Second, there is a new capital gains tax ("CGT") charge payable at the rate of 28% on the post-6 April 2013 element of any gain realised on the sale from 6 April 2013 onwards by companies of high value residential properties. (The pre-6 April 2013 element of any gain is still taxable under the normal tax rules).

There are reliefs from both taxes for properties which are used, broadly, for the purposes of commercial trade such as property development or commercial letting.

Annual residential property tax ("ARPT")

The new ARPT is payable in the following bands

  • £2m to £5m at £15k annually
  • £5m to £10m at £35K annually
  • £10m to £20m at £70k annually
  • Above £20m at £140k annually

The value of the property on specified valuation dates is used to determine whether a property falls within the new charge and if so which band applies. The first specified valuation date is 1 April 2012. Subsequent valuation dates are each five year anniversary of 1 April 2012. The date of any purchase of the property by a new corporate owner is also a valuation date.

If a property was worth less than £2m on 1 April 2012 then it will be outside the ARPT until the next valuation date on 1 April 2017 (unless it is purchased by a new corporate owner in the meantime and has risen in value).

Taxpayers have to determine the value of their properties for these purposes. We recommend that professional valuations are obtained. Where a taxpayer considers that the property is within 10% above or below one of the bands they can apply to HM Revenue & Customs for a so-called "pre-return banding check".2

In the first year of the new charge the taxpayer must make a tax return relating to the ARPT by 1 October 2013. The ARPT for the year must be actually paid by 31 October 2013. In subsequent years the return must be made and the tax paid by 30 April in each year.

The new capital gains tax ("CGT") charge

One of the conditions for the new CGT charge to apply is that the property falls within the ARPT described above. This means that if a property is valued at under £2m on 1 April 2012, so that it falls outside the ARPT charge, then a sale for over £2m within the next five years will be outside the new CGT charge.

As mentioned above, only the post-5 April 2013 element of any gain is within the new CGT charge ie for purposes of the new CGT charge the value of high value residential properties is rebased to 5 April 2013. Property owners who are within the new tax must therefore obtain valuations of their property as at 5 April 2013. Taxpayers can elect to disapply rebasing so that the gain subject to the new CGT charge would be calculated by reference to the actual acquisition cost of the property. There are a few cases where it will be advantageous to disapply rebasing, for example if on 5 April 2013 the property is worth less than its acquisition cost.

Gains arising under the new CGT charge are called "ARPT-related gains". If a loss rather than a gain is realised this is known as an "ARPT-related loss". ARPT-related losses may only be set against ARPT-related gains (and not against normal gains). Likewise ARPT-related gains may be reduced only by ARPT-related gains (and not by normal gains).


The same reliefs for commercial trading businesses are available from both the ARPT and the CGT.

The main reliefs are for businesses engaged in property rental, property development or trading in property. Relief is also available for hotels and for farmhouses on farmland occupied by a farm worker engaged in the related agricultural business. We understand that there will be a relief specifically for charities although at the date of this briefing draft legislation is not yet available.

If a relief applies for only part of the year, the ARPT for that year is proportionately reduced. Similarly if relief is available for only part of the period of ownership to which the new CGT charge relates, then the new charge is proportionately reduced.


Some taxpayers have taken steps to dismantle companies owning high value residential properties in order to come outside the new charges. To ensure that the new charges do not apply a company holding such a property will have to be dismantled before 1 April 2013.

In some cases there might be good reasons why a decision has been taken to retain the company holding high value residential property, for example, in order to retain the protection from UK inheritance tax which such a company can provide for non-UK domiciled individuals. Some people are also retaining the company in view of the possibility that if the Labour party wins the next Election, due in 2015, they would try to introduce a "mansion tax".

In those cases where clients accept that the new charges will, or (depending on values) might be payable it will be important to obtain appropriate valuations. As mentioned above for purposes of the new ARPT a valuation is needed as at 1 April 2012, whilst for purposes of the new CGT charge the valuation needed will be at 5 April 2013.


1 The other entities affected are partnerships which include a corporate partner and collective investment schemes.

2 For further details on this see our briefing note of 20 March 2013 entitled "New annual residential property tax: pre-return banding check service from HM Revenue and Customs".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.