UK REITs are exempt from paying corporation tax on rental income. This means there is more income for the company to distribute to shareholders.
You’re still required to pay tax on that investment income. Distributions from REITs are called property income distributions (PIDs).
PIDs are taxed at source at 20%, the current basic income tax level. If you pay a higher band of income tax then you could be liable to pay more.
REIT tax is complex and involves a lot of nuances, so if you want to get to grips with the finite details of the subject then be sure to do some thorough research. In ISAs, this tax is withheld and reclaimed by Freetrade on a monthly basis, at which point the funds are distributed to associated customer accounts.
Be aware that REITs are also treated differently from country to country, so UK REITs are not treated the same as US ones. Any rules governing them are likely to impact your return on investment, so make sure you’re aware of them.
You can read more about REITs in this article!