Capital Gains on UK Property for Non-Residents

Current Regulations (2024 Update)

As of 2024, non-residents are subject to CGT on both residential and commercial properties in the UK. The tax rates and thresholds vary depending on the type of property and the individual’s total taxable income.

• Residential Properties: Non-residents pay CGT at 18% (basic rate taxpayers) or 28% (higher rate taxpayers).
• Commercial Properties: The CGT rate is typically 20%, irrespective of the taxpayer’s income bracket.
• Annual Exempt Amount: Non-residents benefit from an annual CGT allowance, which currently stands at £12,300.

Non-residents must report and pay any CGT due within 30 days of completing the sale of a property.

Key Changes and Updates

Since the introduction of CGT for non-residents in 2015, there have been several significant updates:

• 2019 Extension: The tax was extended to include commercial properties.
• Post-Brexit Adjustments: Changes following Brexit have affected cross-border tax implications, particularly for EU residents.
• Current Government Proposals: Recent years have seen various tweaks to rates and exemptions, reflecting broader economic and political changes.

Practical Implications

Calculating CGT involves determining the gain (selling price minus purchase price and allowable expenses). Non-residents should also be aware of potential reliefs, such as Private Residence Relief (PRR), which can reduce the CGT liability for properties that were once the owner’s main residence.

Example Calculation:

1. Selling Price: £500,000
2. Purchase Price: £350,000
3. Allowable Expenses: £20,000
4. Gain: £500,000 – £350,000 – £20,000 = £130,000
5. CGT: If a higher rate taxpayer, 28% of £130,000 = £36,400

Non-residents must file a Non-Resident CGT Return within 30 days of the property sale and pay any CGT due within the same period.

Common Questions and Concerns

• Properties Held by Companies: Gains made by non-resident companies are taxed differently, often under corporation tax rules.
• Gains Accrued Before 2015: Only gains accrued since April 2015 are subject to CGT, though valuations may be required to establish the property’s value at that date.
• Example Scenario: If a non-resident sold a UK property in 2024 but had owned it since 2010, only the gain from 2015 to 2024 would be taxable.

What Happens if a Property Owner Becomes a Non-Resident?

If you were a UK tax resident when you bought a property but have since become a non-resident, you are still subject to CGT on the property’s sale. The calculation will consider the property’s value as of April 2015 (or the purchase date if later) to determine the taxable gain.

Example Scenario:

• Purchase Date: 2010
• Non-Resident Since: 2020
• Sale Date: 2024
• Value in April 2015: £300,000
• Selling Price: £450,000
• Allowable Expenses: £20,000

Gain: £450,000 – £300,000 – £20,000 = £130,000 CGT: Higher rate taxpayer (28% of £130,000) = £36,400

What Happens if a Property Was Your Principal Place of Residence?

If a property was your principal place of residence (PPR), you might be eligible for Private Residence Relief (PRR), which can significantly reduce your CGT liability. PRR exempts the gain for the period you lived in the property as your main home, plus an additional 9 months.

Example Scenario:

• Principal Residence: 2010-2020
• Non-Resident Since: 2020
• Sale Date: 2024

In this case, the gain attributable to the period you lived in the property (plus 9 months) is exempt from CGT, and only the gain from the period when the property was not your main residence is taxable.

Calculating PRR:

1. Total Period of Ownership: 14 years (2010-2024)
2. Period as Principal Residence: 11 years (2010-2020) + 9 months
3. Exempt Gain: 11.75 / 14 of the total gain
4. Taxable Gain: Remaining portion of the gain

Example Calculation:

• Gain: £130,000
• Exempt Gain: (11.75 / 14) * £130,000 = £109,107
• Taxable Gain: £130,000 – £109,107 = £20,893

Private Residence Relief can greatly reduce your CGT liability if the property was your principal residence. It’s essential to keep detailed records of your residence periods to accurately calculate the relief. For precise calculations and advice, consulting with a tax professional is recommended.

Potential Changes Under a New Government

With a likely change in government, there could be significant shifts in CGT policy, especially if the Labour Party, known for its progressive tax policies, takes power. Labour has hinted at increasing taxes on property and wealth to fund public services. Investors should stay alert to policy announcements and consider potential tax increases when planning their investments.

Professional Advice and Resources

Given the complexity of CGT regulations and the potential for significant financial impact, non-residents should seek professional tax advice. Consulting with tax experts like those at TaxAgility can ensure compliance and help optimize tax liabilities.

Conclusion

Understanding the current CGT rules for non-residents and anticipating potential changes is crucial for property investors. Staying informed and seeking professional advice can help navigate the complexities and minimise tax liabilities.

Wy not have a friendly no-obligation chat with our experts at TaxAgility?

For personalized advice and support on navigating CGT as a non-resident, contact TaxAgility’s team of expert accountants. We are here to help you make the most informed decisions and manage your tax obligations effectively.