What Taxes Do You Pay on London Property? Insights for Japan Buyers

Japanese investors seeking overseas property prefer London for its stability and transparent framework. They opt for this market for long-term investment, consistent rental income or future relocation.

However, before purchasing a property overseas, understanding its financial picture is important. This London property investment costs guide 2026 explains the key costs and property taxes that Japanese investors can expect when purchasing a property in London.

Understanding the total cost of buying a property in London

When purchasing a property in London, the purchase price is only one part of the investment. Buyers should also factor in other transaction costs. This usually includes:

Stamp Duty Land Tax (SDLT)
Legal and conveyancing fees
Property valuation and survey costs.
Mortgage arrangement fees (if applicable).
Currency transfer costs.
Property management setup for rental properties.

For a more detailed, step-by-step overview of the purchase process, investors can refer to the Complete Guide to Buying Property in London for Overseas Buyers.

UK Stamp Duty and property taxes for Japanese investors

Discussion among Japanese investors on UK stamp duty and property taxation

SDLT is an important government tax that needs to be paid when buying residential property in England. Overseas buyers are further required to pay an additional surcharge on top of standard rates.

As of 2026, overseas investors buying property in London will need to pay standard Stamp Duty rates based on property value and an additional 2% overseas buyer surcharge for all residential properties. First-time buyers can benefit from First-Time Buyer Relief on Stamp Duty Land Tax (SDLT) when purchasing their first UK property; however, higher SDLT will apply if a second property is purchased.

To understand the different tax bands, it’s ideal to go through our UK Stamp Duty explained for Japanese property investors. Understanding UK stamp duty and property taxes for Japanese investors is essential when evaluating the complete investment costs.

UK property tax rates 2026 for overseas investors

In addition to purchase taxes, it is important to understand the ongoing tax and expense structure associated with owning a property in the UK.

Types of taxes

Rental income tax is subject to UK taxation. Overseas owners must declare rental income to HM Revenue & Customs under the Non-Resident Landlord Scheme. As of early 2026, rental income is taxed on net rental profits, not gross income: 20% (basic rate), 40% (higher rate) and 45% (additional rate). Landlords can find a detailed explanation of this structure in the UK rental income tax guide for non-resident landlords.

Capital Gains Tax (CGT) is payable when the landlord decides to sell the property and the value has increased. Overseas owners must pay Capital Gains Tax on the profit from residential property. As of 2026, the basic CGT rate is 18% and 24% for higher-rate taxpayers. CGT must be reported within 60 days of completion.

Council Tax is a local government tax on residential properties in the UK. Usually, tenants pay for this tax; however, if the property is vacant, the responsibility falls on the owner.

Additional costs

Annual property costs (£2,000 to £5,000) include property maintenance, service charges, letting and management fees (8–15% of annual rent) and insurance costs.

To secure a UK mortgage, overseas landlords will need to put down a deposit of 25%-40% upfront. The difference amount can then be financed through the mortgage. Typical interest rates for overseas buyers are 5%-7%.

Most London apartments are sold on a leasehold basis. Leasehold property owners usually pay a small annual charge known as ground rent to the freeholder, which can range from £0 to £500 per year. Under the Leasehold Reform (Ground Rent) Act 2022, many newer developments are now restricted to charging peppercorn ground rent, meaning the charge is effectively zero.

This overview of costs and taxes forms an important part of any overseas property investment tax guide in the UK.

Working with Benham and Reeves Japan

For Japanese buyers investing overseas, clear guidance is important. The Benham and Reeves Japan Desk works with buyers who are seeking professional support when investing in London property.

Our local team offers assistance with identifying suitable investment opportunities in London, breaking down transaction costs and providing end-to-end lettings and property management services for Japanese investors.

With 21 branches across London, our team provides wide coverage and local expertise across the capital’s major residential neighbourhoods.

Speak with Benham and Reeves Japan

If you are considering purchasing property in London from Japan, our team will guide you through the complete process.

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Investing in London from Japan - Breakdown of transaction costs and 2026 tax rates