UK REIT tax explained
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Quick answer: UK Real Estate Investment Trusts must pay out 90% of property rental income to shareholders — dividends are split into property income distributions taxed as income and capital gains distributions.
REITs let retail investors access commercial property through the stock market. HMRC gives them a special tax regime if they meet listing and distribution tests. This guide explains PID and non-PID dividends and how to hold REITs tax-efficiently.
PID versus ordinary dividends
PIDs are paid net of basic-rate tax at 20% — higher-rate taxpayers owe extra through Self Assessment. They appear separately on tax vouchers.
Non-PID dividends follow normal dividend allowance and dividend tax rate rules, though many REIT payouts are mostly PIDs. Your tax voucher shows the split so you can report each component correctly.
Why use REITs
REITs offer diversification into offices, logistics, healthcare and residential property without buying physical buildings. You can buy and sell shares in seconds rather than going through a property purchase chain.
Liquidity is better than direct buy-to-let, but share prices are volatile and can diverge from underlying property values. A REIT trading at a discount does not mean the underlying buildings are worth less overnight.
Common questions
Do REITs pay stamp duty?
You pay stamp duty reserve tax on purchases like other UK shares — 0.5% on most transactions.
Are REITs suitable for pensions?
Many investors hold them in SIPPs for tax-free growth. Check your platform's fund list and charges.
Can non-UK REITs have different tax?
Yes. Overseas property funds may not use the UK REIT regime — check withholding tax and reporting rules.