If you’re a non-resident looking to sell UK real estate, it’s important to understand the implications of the UK’s Non-Resident Capital Gains Tax (CGT). Over the past few years, the rules around CGT for non-residents have become increasingly stringent, and it’s crucial for property owners to stay up to date to avoid any unpleasant surprises when it comes to tax liabilities. In this article, we’ll break down the basics of CGT for non-residents, the deadlines you need to meet, and any available reliefs.
Key Points About Non-Resident CGT
- CGT on Residential and Commercial Property: Non-residents are subject to CGT on both residential and commercial property sales. If you’re selling property in the UK, you need to consider how much the property has appreciated in value since you purchased it, as this will determine how much tax you owe.
- Indirect Disposals: In addition to direct sales of UK properties, CGT also applies to indirect disposals. This means that if you sell shares in a company that primarily holds UK property or land (a property-rich company), you could also be subject to CGT.
- Tax Rates: For residential properties, the CGT rate for non-residents is either 18% or 24%, depending on your total taxable income in the UK. If you’re a higher or additional rate taxpayer, the rate of CGT will be 24%, whereas if your total income falls within the basic rate band, the rate will be 18%. These rates were applicable for the 2024/25 tax year and may change in future budgets, so it’s always a good idea to check the latest rules when planning a property sale.
- Reporting the Sale and Paying CGT: The key change for non-residents is that you must report the sale of your UK property within 60 days of the completion date, and pay any CGT due within the same 60-day window. This must be done through the submission of a Non-Resident CGT Return. Failure to meet this deadline can result in penalties and interest charges, so it’s essential to adhere to the 60-day rule.
- Reliefs and Exemptions: Non-residents can benefit from certain reliefs when it comes to CGT. For instance, if the property was your main residence at some point during your ownership, you may be eligible for Private Residence Relief, which can reduce the amount of taxable gain. This is particularly relevant for those who lived in the property and only recently decided to sell. However, this relief is not automatic, and it’s advisable to consult with a tax professional to confirm if you qualify.
Additionally, there are specific rules that apply to non-residents who are temporarily absent from the UK, such as the Temporary Non-Residency Relief. These rules can help mitigate CGT for those who were non-resident for a period but had previously lived in the property as their main residence.
- Handling the Tax as a Non-Resident: Non-residents need to be aware that they may be required to pay CGT directly to HMRC. The process for non-residents to pay CGT can be complicated and will likely require assistance from a UK tax advisor to ensure everything is filed correctly. For example, there may be issues with converting the sale price into sterling, or reconciling foreign taxes paid with the UK tax due.
How to Minimise CGT on Property Sales
If you’re planning to sell property in the UK as a non-resident, there are a few strategies to help minimise your CGT liability:
- Utilise Available Reliefs: Ensure you take full advantage of any available reliefs, such as Private Residence Relief, if applicable. This can make a significant difference in the final tax amount you owe.
- Consider Timing: If you’re not in a rush to sell, consider holding off on the sale until you’re in a better tax position, such as moving into the UK for a period to claim residence relief.
- Seek Professional Advice: Tax laws are complex, and non-residents may not be fully aware of all the available reliefs and exemptions. It’s advisable to seek professional tax advice from experts in UK property tax who can help you navigate the system.
- Be Aware of the 60-Day Rule: Missing the deadline for reporting the sale and paying CGT can result in penalties. To avoid this, set reminders well in advance of the deadline.
Conclusion
Selling UK property as a non-resident has become a much more complex process, with stricter rules and to file self assessment tax return. If you’re considering selling a UK property, it’s crucial to understand how CGT applies and how to navigate the deadlines and potential exemptions. Ensure that you file your Non-Resident Capital Gains Tax Return within 60 days of completion and consult a professional to make sure you’re minimising your tax liability. By staying informed and proactive, you can avoid unnecessary tax burdens and ensure that your property sale goes smoothly.