Guide to CGT rules for UK expat property owners (updated to include April 2020 changes)

The rule used to be that as long as an expat had been non-UK resident for five consecutive tax years, then they would not be taxed on any gains made when they sold UK property.

However, as of 6th April 2015, that ceased to be the case.

Now, if you are an expat who owns UK property, you will potentially need to pay Capital Gains Tax (CGT). It doesn’t matter how long you have lived outside the UK or even if you never intend to return, the taxman still wants his cut.

How is Capital Gains Tax on UK property calculated for expats?

In most cases, you will be able to rebase the value of your property to the 5th of April 2015.

You will then pay tax in the same way as UK residents do. I.e. the net gain (on the post 5th April 2015 valuation) less any unused annual allowance (GBP12,000 in tax year 2019/2020) is added to any other UK income for the tax year in question.

Depending on your tax bracket, this amount will then be taxed at either 18% or 28% .

Useful link – HMRC provide this handy site for calculating non-resident capital gains tax on property.

Can expats avoid paying Capital Gains Tax on UK property?

If you lived in the property for 90 days or more in the year in which you sold it, you would meet the conditions for private residence relief (PPR). In this case, you wouldn’t have to pay CGT.

Be careful with this however. It may push you into a different residence category for tax according to the UK’s Statutory Residence Test. This could have have serious implications on your overall tax position.

How do I report the gain and when is the tax payable?

From 6th April 2020, HMRC has changed the way that expats need to pay Capital Gains Tax on the sale of UK property.

Pre-April 2020 Capital Gains Tax rules for expats who are selling UK property

Previously, sellers were required to complete a Non-Resident Capital Gains Tax Return after the sale of any UK residential property. This had to be done within 30 days.

Sellers were also required to calculate the CGT liability arising and make a payment on account of the full amount of the calculated liability, within that 30 same day period.

However, the seller was already subject to self-assessment, they had the option to report any capital gains on their tax return. In such instances, any CGT due is then payable by 31 January following the year in which the disposal was made.  

For example, if a property was sold on 1 May 2018, the gain would be reportable on the 2018/19 tax return. Any tax would be payable by 31 January 2020. 

This gave the seller a period of 10-22 months from the time that the sale is made before the tax needed to be paid.

Post-April 2020 Capital Gains Tax rules for expats who are selling UK property

This option ceased on 6 April 2020.

From that date, CGT incurred following the disposal of a residential property will have to be paid within 30 days of the completion date in all cases.

Failure to pay on time will result in HMRC imposing interest and potential penalties. 

This new deadline applies even where no money has changed hands. For example, the rule will also apply when a property is transferred into trust or gifted to a family member.

Conclusion

This new rule gives sellers a limited window to ensure that funds are in place to cover the CGT liability. Collating all of the relevant information to prepare a tax calculation in time is also going to be a challenge.

Resources

Tell HMRC about Capital Gains Tax on UK property or land if you’re non-resident

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