Property Tax Glossary

Section 24 is the common name for the rule, introduced by section 24 of the Finance (No. 2) Act 2015, that stops individual landlords deducting mortgage interest and other finance costs from residential rental income. Instead they get a tax reduction at the basic rate. It was phased in from April 2017 and fully applied from April 2020. It doesn't apply to companies.

Finance costs include mortgage interest, interest on loans to buy furnishings, and the fees and incidental costs of taking out or repaying a loan, such as arrangement and broker fees. For individual residential landlords, these aren't deducted from rental income but relieved as a basic-rate tax reduction. Capital repayments of a mortgage were never deductible.

Legal ownership is whose names are on the title at HM Land Registry. Beneficial ownership is who is actually entitled to the property's value and income. They're usually the same, but can differ, for example under a declaration of trust. For tax purposes, rent and gains generally follow beneficial ownership, which is why it matters.

These are two ways of owning property jointly. Joint tenants own the whole property together, with no separate shares, and the survivor automatically inherits. Tenants in common each own a distinct share, which can be unequal and can be left by will. Unequal income splits between spouses using Form 17 need a tenancy in common.

A declaration of trust is a legal document recording who owns the beneficial interest in a property and in what shares. It can show, for example, that a property in one person's name is owned 70:30 with their spouse. It's often used alongside Form 17 to support an unequal split of rental income between spouses or civil partners.

Form 17 is the HMRC form married couples and civil partners use to declare that they own a jointly held property in unequal shares, so rental income is taxed according to their actual shares rather than 50:50. HMRC must receive it within 60 days of the declaration. It can't be used where the couple are joint tenants.

Incorporation relief, under section 162 of the Taxation of Chargeable Gains Act 1992, defers capital gains tax when a business is transferred to a company as a going concern, with all its assets other than cash, in exchange for shares. The gain reduces the base cost of the shares. For a property portfolio, the letting must amount to a business.

It's an extra amount of stamp duty land tax on buying an additional residential property, such as a buy-to-let, or on purchases by companies. The surcharge is currently 5 percentage points on top of the standard residential rates in each band. It applies in England and Northern Ireland; Scotland and Wales have their own equivalents.

ATED is the Annual Tax on Enveloped Dwellings, a yearly charge on companies and some other non-natural persons that own a UK residential property valued at more than £500,000. Property rental businesses letting to unconnected tenants can usually claim relief, but they must still file an ATED return, normally by 30 April at the start of each chargeable period.

A Family Investment Company, or FIC, is a private company used to hold family investments, such as property, with parents usually keeping control through voting shares while children hold shares that benefit from future growth. It's an alternative to a trust for passing on wealth. The tax treatment depends on how it's funded and the share rights.

The non-resident landlord scheme applies when a landlord's usual place of abode is outside the UK. Letting agents, or tenants paying more than £100 a week where there's no agent, must deduct basic-rate tax from the rent unless HMRC has approved the landlord to receive rent without deduction. The landlord still files a UK tax return.

Private residence relief removes or reduces capital gains tax on selling a home that has been your only or main residence. If you've also let it, the relief covers the periods you lived there plus the final 9 months of ownership in most cases. The rest of the gain is usually taxable, although lettings relief may help in limited cases.

When a UK resident sells a UK residential property and capital gains tax is due, they must report the sale to HMRC and pay an estimate of the tax within 60 days of completion. Non-UK residents must report any disposal of UK property or land within 60 days, even if no tax is due.

A director's loan account records money flowing between a company and its director. If you lend money to your property company, or sell properties to it on credit, the company owes you that amount and can usually repay it without further tax. If the company lends to you instead, a corporation tax charge can arise on loans not repaid in time.

It's where you give something away but keep a benefit from it, for example giving a property to your children but continuing to receive the rent or live there rent-free. For inheritance tax, the property is treated as still part of your estate when you die, so the gift doesn't save inheritance tax as intended.

The residence nil-rate band is an extra inheritance tax allowance of up to £175,000 per person when a home you've lived in passes to your direct descendants, such as children or grandchildren, on death. It's reduced by £1 for every £2 the estate exceeds £2 million. Buy-to-let properties don't qualify unless you lived in them.

Making Tax Digital for Income Tax requires individuals with qualifying income from property and self-employment above a threshold to keep digital records and send quarterly updates to HMRC using compatible software. The threshold is £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028. It's based on gross income, not profit.

It's the new 22% basic rate of income tax for property income, due to apply from 6 April 2027 in England, Wales and Northern Ireland, alongside a property higher rate of 42% and a property additional rate of 47%. The basic-rate tax reduction for finance costs is also due to be calculated at the property basic rate from that date.

We include the terms landlords and their advisers most often meet when making decisions about a portfolio: on income, buying, selling, incorporating, companies, inheritance and non-residence. Each definition is short, plain English and checked against the current law, with a link to the page that explains the subject in more depth.

Yes. If you've come across a property tax term that isn't here, email taxadvisory@aswatax.co.uk and we'll consider adding it. We review the glossary when the law changes to keep definitions accurate. If you need a term explained for your own situation, book a free call and a senior adviser can tell you what it means in practice.