Buying in London vs back home: what Americans really pay

Nobody in England cares about your passport when you buy, but HMRC cares a lot about the house you kept in the States, and the IRS cares about the gain when you sell.

The short version

• Americans can buy freely in London. There's no foreign-buyer approval, quota or ban in England.
• Stamp Duty Land Tax (SDLT) is the big upfront cost. Own a home anywhere else, including back home, and you pay 5 percentage points more on the whole price. Arrive recently and add a 2% non-resident surcharge [1][2].
• The UK usually doesn't tax the sale of your main home, but the IRS does tax your worldwide gain. Section 121 only shelters USD 250,000 (USD 500,000 joint), and with no UK tax to credit, the excess is fully exposed to US tax [3][4].
• A pound mortgage can create a US "gain" when you pay it off, even if you never made a penny.
• Keeping a New York apartment you've left? The exclusion lasts only while you still pass the 2-of-5-years test [3].

USD conversions use the Federal Reserve H.10 rate of October 30, 2026 (USD 1.3398 per pound), rounded.

Can Americans buy in London?

Yes, on the same terms as a Londoner. England has no foreign-ownership approval and no "locals only" class of property. An apartment in Clapham or a townhouse in Islington is open to you on a Skilled Worker visa or as a visitor.

What changes the bill is not your citizenship but two facts HMRC asks about:

1. Will you own more than one residential property, anywhere in the world, after the purchase? If yes, and the London home isn't replacing your main residence, the 5% higher rates apply [1].
2. Were you in the UK for at least 183 days in the 12 months before you buy? If not, you're non-UK resident for SDLT and pay 2% on top [2].

Couples are treated as one unit. If your spouse still owns the condo in Brooklyn, you're both caught, and if either buyer is non-resident, everyone on the deed is treated as non-resident [2].

A few things feel different from a closing back home. Most London apartments are leasehold, with a service charge and sometimes ground rent, so check the lease length early. And the seller, not the buyer, pays the estate agent.

Getting a loan: UK lender or US lender?

In London. UK lenders lend to foreign nationals who live and work in the UK, but each sets its own rules on visa type, time in the country and deposit size. Expect a bigger down payment ("deposit" in UK-speak) than a British buyer would need, especially early in your visa.

How much you can borrow is capped by income multiples. The Bank of England treats a loan at 4.5 times income or more as high loan-to-income lending and keeps such loans to about 15% of new mortgages across the market. From October 28, 2026, that 15% applies to the market as a whole rather than to each lender, so some lenders may stretch past 4.5 times more often [5].

Back home. Borrowing against a US home (a cash-out refinance or a HELOC) and paying cash in London is the other route, but qualifying with foreign income takes patience. Our guide to US mortgages for Americans living abroad covers what lenders ask for.

The currency trap. The IRS measures a sterling mortgage in dollars. If the pound weakens while you owe it, paying the loan off can produce a taxable US currency gain, even though you repaid exactly what you borrowed. It cuts one way only: in a 1996 case about an American couple with a pound mortgage on their UK home, a federal appeals court held that their currency loss on the loan couldn't be set against their taxable gain on the house [6]. Our guide to currency gains on a foreign mortgage explains how it works and when refinancing triggers it.

Costs side by side

Rates as of November 2026.

A worked example

Illustration only. A £600,000 two-bedroom apartment (about USD 804,000):

The math: nothing on the first £125,000, 2% of the next £125,000 (£2,500) and 5% of the remaining £350,000 (£17,500). The higher rates add 5% of the full price (£30,000), and the non-resident surcharge adds 2% (£12,000) [1][2]. First-time buyer relief doesn't help: you must never have owned a home anywhere, and the price is over £500,000 anyway.

Two escape hatches exist. If the London apartment replaces your main residence and you sell the old one within 36 months, you can claim the extra 5% back [1]. And if you spend 183 days in the UK in any continuous 365-day window running from 364 days before to 365 days after completion, you can amend your return within two years and recover the 2% [2].

Tax when you sell

The UK side

Sell the apartment you've lived in as your only or main home, and Private Residence Relief usually wipes out the UK gain. Sell a buy-to-let or second home and residential gains are taxed at 18% within your basic-rate band and 24% above it [7]. UK residents report and pay within 60 days of completion if tax is due; non-residents must report every UK property sale, even when there's nothing to pay.

The US side

Uncle Sam still taxes your worldwide gain, measured in dollars:

1. Section 121 works for a foreign home. If you owned and lived in the apartment for at least 24 months of the 5 years before the sale, you can exclude up to USD 250,000 of gain, or USD 500,000 for most joint filers [3]. Nothing limits it to US homes.
2. The exposure above the cap. London prices are high, and a long-held family home can easily beat USD 500,000 of gain. Because the UK usually charges nothing on a main home, there's no UK tax to claim as a credit, so the excess is taxed in full by the IRS.
3. The foreign tax credit helps on rentals. UK CGT on a buy-to-let is an income tax, so you can claim it on Form 1116 against US tax on the same gain [4]. SDLT and council tax aren't income taxes and don't count.
4. Currency counts. Your dollar cost uses the rate when you bought; your proceeds use the rate when you sell. A pound that strengthened can leave you with a US gain on an apartment that sold at a loss in sterling.

Your old place in New York

The clock keeps running once you leave. After you've been out of the home for more than three years, you've usually lost the exclusion. Depreciation from renting it out is taxed on sale even if the rest is excluded, and New York can still tax the gain as New York-source income. Our guide to selling your US home after moving abroad has the timing details.

Renting it out

The UK side. Rent from a London apartment is UK income, taxed at your marginal rate. Mortgage interest isn't deducted in full; you get a credit at the basic rate instead. If you move away and keep the apartment, the Non-Resident Landlord Scheme applies: your agent or tenant withholds tax unless HMRC approves you to receive rent gross.

The US side. Report the rent on Schedule E. A London apartment is used predominantly outside the United States, so it must be depreciated under the Alternative Depreciation System over 30 years, not the 27.5 years you'd use for a Queens rental [8][9]. Service charges, repairs and letting-agent fees are deductible, and UK income tax on the rent can go on Form 1116.

If you're renting out the place back home instead, our guide to rental income from a US property covers the stateside rules.

Which makes sense for whom

• Staying long term. Buying in London can make sense, especially if you sell the US home first so the 5% higher rates don't apply. Watch the Section 121 cap if prices climb.
• Retiring in the UK. Similar logic, plus estate planning: UK inheritance tax and the US estate tax both reach a London home. Our guide to wills and estate planning across two countries is the starting point.
• Moving back in a few years. Renting in London and keeping (or buying) stateside is usually the simpler call. SDLT, solicitor fees and a possible surcharge take years to earn back, and a pound swing can turn a paper gain into a loss, or the other way around.
• Just arrived. Wait until you've passed the 183-day mark or plan the refund window carefully, and check whether you'll still own a US home on completion day.

A US expat tax preparer (or a UK lawyer) can check your situation before you exchange contracts.

Sources

1. Stamp Duty Land Tax: residential property rates – GOV.UK
2. Rates of Stamp Duty Land Tax for non-UK residents – GOV.UK
3. Topic no. 701, Sale of your home – IRS
4. Foreign tax credit – IRS
5. High loan-to-income lending policy statement – Bank of England
6. Quijano v. United States, 93 F.3d 26 (1st Cir. 1996) – Public.Resource.Org
7. Capital Gains Tax: rates of tax – GOV.UK
8. Publication 527, Residential rental property (2025) – IRS
9. 26 U.S. Code § 168, alternative depreciation system – Cornell Law School LII

Keep reading

• UK taxes for Americans: how they fit with your US return
• Renting in London
• Council tax in London explained
• Keeping or renting out your US home after you move abroad