Landlords have long suspected that UK property taxes are higher than in many other countries, and previous studies have shown this to be the case, but to come out at the top of the rankings is somewhat galling for UK owners to say the least.

It’s the second year running that the UK has topped these rankings for the highest property taxes as a percentage of overall taxation. The highest in the developed world, that’s according to new OECD data.

According the OECD’s latest figures, tax revenues from UK property were at £90.6 billion during the financial year for 2019/20, that figure is up from £88.4 billion in the previous year – it also means that the UK has seen the highest property taxes in six of the last 10 years, according to the organisation.

The OECD’s definitions state that taxes on immovable property – often simply called “property” or “real estate” tax – comprise levies on land and buildings and other physical capital like machinery. They can be considered a capital tax since they tax an asset or an input to production. They can be considered a consumption tax since they tax the services that derive from living in an apartment or a house. They can also be considered an income tax since they tax the imputed rent from owning a house.

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Property taxes are generally based on the value of immovable property assets, and unlike most other taxes, property values are generally based on estimates. Therefore accurate valuation and assessment of properties is key to a fair, efficient property tax system. Valuations in turn are based on a property’s potential market value which is generally considered to be the most appropriate yardstick for determining the property tax base.

For the UK, the OECD’s property tax figures include all receipts from council tax, business rates and stamp duty, while for Scotland they also include land and building transaction taxes.

Covid-19 has “muddied the waters” somewhat given that, in particular commercial retail property values have been in rapid decline, while most residential property has actually increased in value slightly, meaning that it’s difficult for fair tax rates to keep pace.

During the UK lockdowns retailers big and small and hospitality firms have been given a business rates holidays to ease the burden. Meanwhile several retailers, including supermarkets that have gained somewhat from the crisis, have subsequently agreed to hand over the savings, including Tesco, Sainsbury’s and Aldi, in total to around £2 billion. Rishi Sunak the Chancellor has also introduced a stamp duty holiday for those buying a house below £500,000 in England until 31, March 2021.

Property taxes in the UK accounted for 12.4% of overall taxation, with in second place the US at 12.1%, Canada at 11.6%, South Korea at 11.4% and Israel at 10.1%.

Robert Hayton, head of property tax at Altus Group, told

“The unexpected cost of Covid might mean that the Chancellor has limited short-term scope to meet his commitment to reduce the burden of tax on commercial property, but that mustn’t also mean potential reforms are shelved.

“There are fiscally neutral, and blindingly obvious, changes that could be made to property taxes that would increase fairness and pave the way for a better system in the future.”


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