British Expats to Pay Tax on Home Sales

From April 2015, non-UK residents will have to pay tax on gains from property sales – but there are important reliefs. By Iain Yule.

The UK government has published the final version of its plans to impose capital gains tax (CGT) on disposals of UK property by non-residents, starting in April 2015. This is according to reports in the Journal of the Society of Trust & Estate Practitioners (STEP).

This measure was first announced a year ago in the UK Chancellor of the Exchequer’s 2013 Autumn Statement and was followed by a consultation in April 2014. Historically, non-residents have not paid CGT on investment gains from UK residential properties.

All valuations will be rebased to April 2015, when the new policy comes into force. Thus the CGT charge on disposal – set at the usual 28 per cent – will be limited to capital gains that have accrued after that date.

Non-resident individual owners will also be able to claim the usual UK annual exemption from CGT (£11,000 in tax year 2014/15). Non-resident owners of homes in the UK will be entitled to the same CGT reliefs and exemptions as UK taxpayers. In particular, they can claim 100 per cent CGT relief on their UK home if it is their main residence – the so-called principal private residence (PPR) exemption.

However, the STEP Journal reports that an extra restriction has been introduced on the PPR exemption. In the past, a UK taxpayer who lived in more than one home was free to elect which was to be the main residence for PPR purposes.

In future, however, the UK taxman will not accept that a UK home can be a non-resident’s main residence for CGT purposes for a tax year unless they have resided in the property for at least 90 midnights in that year.

The same rule will apply in reverse to UK-resident owners of second homes in other countries.

 

Iain Yule is the Editorial Director of World of Expats

 

See also the article UK Home Buyers Could Benefit From Stamp Duty Changes