Prevention of double taxation. Any tax paid in the UK does not have to be paid again in Japan, as the foreign tax credit system applies.
For Japanese residents with no other UK-sourced income, only the net rental income — rental income after deducting allowable costs — is subject to UK income tax.
Income Tax in the UK (as of July 2025)
| £0- £12,570 | 0% |
| £12,571- £50,270 | 20% |
| £50,271- £125,140 | 40% |
| £125,141 | 45% |
Residents of Japan are subject to comprehensive taxation on their worldwide income.
In Japan, UK net rental income is aggregated with domestic income and taxed under the progressive income tax system. The foreign tax credit applies, so any tax already paid in the UK is offset against the Japanese liability.
Japanese national income tax: Applied on a progressive basis, currently set as below (as of July 2025)
| (Taxable Income) | (Tax rate) | (Personal Allowance) |
|---|---|---|
| (up to 1,950,000yen) | 5% | (0 yen) |
| (up to 3,300,000yen) | 10% | (97,500yen) |
| (up to 6,950,000yen) | 20% | (427,500yen) |
| (up to 9,000,000yen) | 23% | (636,000yen) |
| (up to 18,000,000yen) | 33% | (1,536,000yen) |
| (up to 40,000,000yen) | 40% | (2,796,000yen) |
| (above 40,000,000yen) | 45% | (4,796,000yen) |
Resident tax: Levied at 10% of taxable income
Mr Yamada
Living in Japan, Annual income
10,000,000yen (= £51K)
| Purchased price | £800K |
| Property | 1bedroom, new built, 592sqft |
| Solicitor Fee | £3000 |
| Furniture | £10,000 |
| Stamp Duty | £46,000 |
| Rent | £3100pcm |
| Tenancy Term | 1 year |
| Agent Fee (Let + Manage) | 12%+VAT |
| Administration Fees | £390 |
| Cleaning | £250 |
| Inventory (In & Out) | £320 |
| Service Charge | £4144 (£7/sqft) |
| General Maintenance | £1000pa |
Note: The above is provided solely as an illustrative example to aid understanding of the tax system and its general framework. The figures shown do not represent exact amounts or actual tax liabilities. Actual income, costs, applicable taxes, rates, and other details will vary in each individual case. We strongly recommend that you seek advice from a qualified tax advisor.
Income
| Rent: | £37,200 |
| Total Income: | £37,200 |
|---|
Cost
| Agent Fee | £5,356.80 |
| Admin Fees | £390 |
| Cleaning | £250 |
| Inventory (in & out) | £320 |
| Service Charge | £4,144 |
| General Maintenance | £1,000 |
| Total Expense | £11,460.80 |
|---|
Taxable Income
£37,200 – £11,460.80 = £25,739.20
(Personal Allowance)
£25,739.2 - £12,570 = £13,169.20
| £0-£12,570 | 0% |
| £12,571- £50,270 | 20% |
| £50,271- £125,140 | 40% |
| £125,141 - | 45% |
Tax to pay in UK
£13,169.20 x 20% = £2,633.84
Note: The above is provided solely as an illustrative example to aid understanding of the tax system and its general framework. The figures shown do not represent exact amounts or actual tax liabilities. Actual income, costs, applicable taxes, rates, and other details will vary in each individual case. We strongly recommend that you seek advice from a qualified tax advisor.
Comprehensive taxation including overseas income, with the application of the foreign tax credit
(limit = foreign income ÷ total income × Japanese tax liability).
Accordingly, the tax payable in Japan will vary depending on the level of domestic income in Japan
We set £1= 195yen as an assumption for this case.
Taxable income from UK Property
£37,200-£11,340.80 = £25,739.20 Approx. 5,000,000yen
Income in Japan: 10,000,000yen
Total combined taxable income: 15,000,000yen
Assuming an effective tax rate — the ratio of total tax actually paid under the progressive tax system to taxable income — of around 30%. For illustration, let us suppose taxable income, after employment income deductions and other basic allowances and social insurance contributions, amounts to approximately JPY 6.5 million.
Since overseas property income of JPY 5 million is added, total taxable income becomes approximately JPY 11.5 million. The additional tax payable amounts to around JPY 2.1 million. After deducting about JPY 0.5 million already paid in the UK, the net additional tax burden is roughly JPY 1.6 million. However, as this calculation is influenced by domestic Japanese income, it does not represent the tax burden attributable solely to overseas property income. For reference only, the indicative additional Japanese tax burden on overseas property income of JPY 5 million is: JPY 5 million × 30% – JPY 0.5 million (tax paid in the UK) = approx. JPY 1.0 million.(The actual figure will vary depending on domestic income in Japan.)
Note: The above is provided solely as an illustrative example to aid understanding of the tax system and its general framework. The figures shown do not represent exact amounts or actual tax liabilities. Actual income, costs, applicable taxes, rates, and other details will vary in each individual case. We strongly recommend that you seek advice from a qualified tax advisor.
Capital Gains Tax is a tax on the profit realised from selling an asset (e.g. investment property, shares, cryptoassets), calculated as the sale proceeds minus the purchase price and associated costs. The sale of a primary residence (main home) is generally exempt under Private Residence Relief. However, second homes, rental properties, holiday homes and other non-primary residences are subject to Capital Gains Tax. If the annual gain remains below the exempt allowance, no tax is payable; only the portion exceeding this allowance is subject to tax.
| Point | For the tax year 2025/2026 |
| Annual Exempt Amount (AEA): the annual tax-free allowance for capital gains | £3000 (individual)/ £1500 (Trust) |
| Tax rate – Basic rate band | 18％ |
| Tax rate – Higher rate band | 24％ |
| Reporting deadline – Residential property | Reporting and payment to HMRC must be made within 60 days of completion of the sale. |
| Key deductible expenses | Purchase costs, capital improvement expenditure, and disposal-related expenses such as legal and agency fees. |
Mr Yamada, a resident of Japan, purchased a property in 2025 for £800,000. At the time of purchase, the costs were £3,000 in legal fees plus the applicable SDLT in 2025. The property was then sold in 2035 for £1.06 million. On the sale, there was a 2% agent’s fee, £3,000 in legal fees, and £3,000 spent on interior improvements as costs. From the time of purchase until the sale, the property was continuously let. In this case, how much Capital Gains Tax would Mr Yamada be liable to pay, assuming that the tax rates in 2035 are the same as those in 2025
Calculating Capital Gain Tax
Sales Price：
Purchased Price：
Cost upon purchase：
【SDLT（based on 2025 rule）】
2% add on for non-resident Landlord:
SDLT total: £46,000
Cost upon Sold：
| （£） | |
| Purchased Price | £800,000 |
| SDLT | £46,000 |
| Solicitor (purchase＆sell） | £3,000 + £3,000 |
| Improvement | £3,000 |
| Agent Fee | £21,200 |
| Total Cost | £876,200 |
|---|
Calculation of Capital Gain：
Capital Gain = Sold Price – Purchased total cost = £1,060,000−£876,200=£183,800
Tax Amount
£37,700 x 18% = £6,786
(£180,800 - £37701)×24%=£34,343.76
合計税額＝£41,130
Total Capital Gain Tax for Mr Yamada to pay is approximately £41,130
| Value when you sold the property | £1,060,000 |
| Minus the value of the property when you acquired it | £800,000 |
| Minus all costs, including improvements | £76,200 |
| Total gain | £183,800 |
| Your deductions | |
| Capital Gains Tax Annual Exempt Amount used | £3,000 |
| Total deductions | £3,000 |
|---|
| Total gain | £183,800 |
| Minus deductions | £3,000 |
| Taxable gain | £180,800 |
| £37,700 taxable gain multiplied by 18% tax rate | £6,786 |
| £143,100 taxable gain multiplied by 24% tax rate | £34,344 |
| Tax to pay | £41,130 |
|---|
https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/summary
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