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Home London property taxation for Japanese

London property taxation for Japanese

About tax

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

Tax example scenario

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.

Tax in the UK

Income

Total Income:	£37,200
Rent:	£37,200

Non-Residents Landlord

Cost

Total Expense	£11,460.80
Agent Fee	£5,356.80
Admin Fees	£390
Cleaning	£250
Inventory (in & out)	£320
Service Charge	£4,144
General Maintenance	£1,000

Taxable Income

£37,200 – £11,460.80 = £25,739.20

(Personal Allowance)

£25,739.2 - £12,570 = £13,169.20

UK Income Tax (Jul 2025)

£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

Tax to pay in Japan

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.)

What is Capital Gain Tax

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：

£1,060,000（2035）

Purchased Price：

£800,000（2025）

Cost upon purchase：

Solicitor：£3,000
SDLT（Stamp Duty Land Tax）：

【SDLT（based on 2025 rule）】

2% add on for non-resident Landlord:

up to £125,000 x 2% = £2,500
125,001 → £250,000 × 4% = £5,000
次の£675,000（£250,001〜£925,000）→ £550,000 × 7% = £38,500
最後の£(910,000−925,000) = £0 → not applicable

SDLT total: £46,000

Cost upon Sold：

Agent Fee£1,060,000 × 2% = £21,200
Solicitor：£3,000
Improvements：£3,000

Total Cost	£876,200
	（£）
Purchased Price	£800,000
SDLT	£46,000
Solicitor (purchase＆sell）	£3,000 + £3,000
Improvement	£3,000
Agent Fee	£21,200

Calculation of Capital Gain：

Capital Gain = Sold Price – Purchased total cost = £1,060,000−£876,200=£183,800

How to calculate Capital Gain Tax

Mr Yamada’s Profile：Resident of Japan, (Non-Resident of UK) Capital Gain Tax is chargeable to Non-resident of UK.
Private Residence Relief cannot be applicable as the property has not been lived by the owner
Annual tax allowance is assumed to be the same at £3000
Taxable Profit = £183,800−£3,000 = £180,800
Tax Rate (Property asset for non-resident landlord)：18% up to £37,700（Basic Rate)、24% for above £37,701 (Higer Rate)

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

Your total gain

Total deductions	£3,000
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

Your taxable gain

Total gain	£183,800
Minus deductions	£3,000
Taxable gain	£180,800

Your tax rate based on your Income Tax bands

Tax to pay	£41,130
£37,700 taxable gain multiplied by 18% tax rate	£6,786
£143,100 taxable gain multiplied by 24% tax rate	£34,344

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/summary