"Britain, the cheapest place in the world to buy a flat"

Taxand says that residential investors in the UK pay among the world’s lowest tax at only 4.86 per cent on buying flats and 9.48 per cent on buying houses

Deirdre Hipwell

January 2 2012

Sales of flats in Britain are so lightly taxed by the Exchequer that it is now the cheapest country in the world in which to invest in residential property, a global tax advisory group has claimed.

Taxand says that residential investors in the UK have among the world’s lowest tax burdens, with a total tax of only 4.86 per cent and 9.48 per cent, respectively, taken from the sale of flats and houses.

It said that the “tax take” for flat sales was the cheapest in the world, while the 9.48 per cent tax on houses was beaten only by Malaysia, “which boasted a total tax take of just 8.41 per cent”. Britain was also second-cheapest for buy-to-let investors, with residential rental income hit by a tax take of only 21 per cent.

These low rates compared favourably with many other countries. Austria and India have among the highest tax burdens in world, with residential sales taxed at 27.14 per cent and 25.24 per cent, respectively. This is because both countries have high sale transfer taxes of 4.6 per cent and 8 per cent, respectively, and charge VAT of 20 per cent and 10 per cent on the sale of residential units.

Austria is also the most expensive location to buy a flat, with sales taxed at 25.15 per cent, closely followed by Romania, where flat sales are taxed at 23.15 per cent.

Taxand compiles the Total Tax Take Report every year to show the comparative benefits and disadvantages of investing in residential property in 29 countries.

It says that Britain compares so favourably with many other countries because there is no VAT levied on the construction and sale of residential property and because of the different stamp duty land tax thresholds on residential units.

Keith O’Donnell, head of real estate at Taxand, said: “The disparity shown across the globe was surprising ... many Western European countries sit at the cheaper end of the tables.”