The landscape of Capital Gains Tax (CGT) for non-residents in the UK, especially regarding property, has undergone significant changes in recent years. Understanding these changes is crucial for non-residents who have disposed of or plan to dispose of property in the UK. This guide aims to simplify the complexities of CGT for non-residents, providing a clear overview of what’s required.
Tax if you live abroad and sell your UK home
If you live abroad and sell your UK home, you may need to pay tax on profits since April 2015. It’s important to inform HMRC about the sale within 60 days, even if you don’t owe tax. Tax relief is often available, especially if you’ve spent significant time in the home. However, this relief can be limited if you’ve rented out part of your home, used it for business, or if the property is large. The last nine months of ownership usually qualify for full tax relief, which is longer for those with disabilities or in care.
- Extension of CGT for Non-Residents: Since 6 April 2019, non-resident CGT covers both direct and indirect disposals of all UK property or land. This includes residential, non-residential, and mixed-use properties.
- Corporate Entities: From the same date, non-resident companies are subject to Corporation Tax on gains from UK property rather than CGT. This applies to collective investment vehicles and life assurance companies.
- Reporting Requirements: Since 6 April 2020, non-residents must report and pay CGT for disposals of UK property or land, including residential, non-residential, and mixed-use properties.
Calculating the Gain or Loss
There are three primary ways to calculate the gain or loss: using the market value as of the 5th April 2015, a time apportionment method, or calculating over the whole ownership period. Getting an accurate property valuation is the owner’s responsibility and, whilst HMRC doesn’t prescribe a specific valuation method, professional valuation is always advisable.
- Rebasing Method: For properties owned before the 6th of April 2015, the standard approach is to use the market value on 5 April 2015 and calculate the difference from the disposal date value. Similarly, for assets owned before the 6th of April 2019, the market value as of the 5th of April 2019 is used.
- Time Apportionment: Alternatively, a simple straight-line time apportionment of the whole gain over the ownership period can be used, though this might be more beneficial in case of a loss.
Find out more about working out your taxable capital gain or loss with the HMRC Capital Gains Tax calculator here
Key Reporting and Tax Payment Information for Property Disposals
- Mandatory Reporting: Disposals must be reported to HMRC even if no tax is due or a loss was incurred.
- Reporting Time Frame: The disposal of UK residential property must be reported and any due tax paid within 60 days of selling the property if the completion date is on or after 27 October 2021.
- Online Reporting: Disposals are reported using an online CGT account, requiring specific details about the property and the disposal.
- Self-Assessment Inclusion: If you complete a Self-Assessment tax return, you must include details of the disposal unless it’s your main home and qualifies for Private Residence Relief.
Find out more about when and how you need to report disposals and pay Capital Gains Tax if you’re not a resident of the UK here.
Tax Relief and Exemptions
- Private Residence Relief: Non-residents may qualify for Private Residence Relief, particularly if they, their spouse, or civil partner spent at least 90 days in the UK home during the tax year.
- Final Period Relief: Full tax relief is granted for the last nine months of ownership (36 months for disabled or long-term residential care individuals), with some exceptions.
- Annual Exempt Amount (AEA): CGT is only payable on gains above the AEA. For 2023 to 2024, the AEA for individuals, personal representatives and trustees for disabled people is £6,000. For all other trustees, it’s £3,000. Find out more here.
- International Treaties: Double Taxation Treaties can affect tax liability, with a requirement to file UK tax returns to claim treaty relief.
Compliant and Informed
Understanding and complying with the UK’s CGT requirements for non-residents can be challenging, but it’s essential to avoid penalties and optimise tax liabilities.
At Norwich Accountancy, we know that everyone’s situation is different. Our specialists can help you navigate the world of UK property as a non-resident, especially for complex cases or significant property disposals. Don’t hesitate to get in touch for advice on staying informed and compliant, and to tackle the topic of tax stress-free.