Spotlight on CGT for Non-UK Residents

When it comes to managing property investments, understanding the tax implications of selling a property in the UK as a non-resident is crucial.

If you are a non-UK resident living in Dubai and are considering selling your UK property, it is essential to understand the specifics of Capital Gains Tax (CGT) that may apply to your sale.

This blog aims to provide you with an overview of the CGT regulations for non-UK residents.

Understanding cgt

Capital Gains Tax is a tax on the profit (the gain) you realise upon selling an asset that has increased in value. It is the gain you make that is taxed, not the total amount of money received. For non-UK residents, CGT on UK property has specific rules that have been in effect since April 2015.

CGT for Non-UK Residents on UK Property

From April 2015, the UK government introduced changes to how CGT is applied to non-UK residents disposing of UK property. This means that any gains made on the sale of residential property in the UK will be subject to CGT, even if you are a non-resident. Here are key points to consider:

1. Scope of Tax: CGT applies to any gain made on UK residential property by non-residents. This includes both direct sales of property and indirect disposals, such as selling shares in a "property-rich" company where more than 75% of its value derives from UK real estate.

2. Personal Allowance: As a non-resident, you are typically not entitled to the tax-free allowance for CGT purposes unless you are a British citizen or EEA national who has not severed substantial ties with the UK.

3. Calculating the Gain: The gain is generally calculated by subtracting the acquisition cost from the disposal price. However, for properties owned before April 2015, you can either compute the gain across the entire period of ownership or only from April 2015 onwards, depending on which is more favourable.

Quickfire Case Studies

Case Study 1: Complete Exemption from CGT

John, a non-resident who lives in Dubai, sold his UK property which he inherited in 2016. Since the property was his main residence until 2018 before he moved to Dubai, he qualified for Private Residence Relief for a portion of the gain covering his residency period and the last 9 months of ownership.

Case Study 2: Partial Liability

Sarah, an Australian living in Dubai, sold a London flat in 2021 that she purchased in 2010. Since she never lived in the property, she cannot claim Private Residence Relief. Her chargeable gain was calculated from April 2015 to 2021, and she had to pay CGT on this gain.

Professional Advice

Given the complexity of these rules and the potential for significant financial impact, it is always best to seek professional advice. Tax regulations are subject to change, and personal circumstances can significantly affect tax obligations. A qualified tax advisor can provide guidance tailored to your specific situation, helping you comply with UK tax laws while minimising potential liabilities.

At the Tax Faculty we have decades of experience in tax consultancy, supporting countless clients (both in the UK and around the globe) in navigating the CGT minefield in a way that is simple, straightforward and ensures that they receive advice that is bespoke to their situation. While the quickfire case studies above highlight two different scenarios where CGT liabilities on UK property can vary significantly depending on several factors, including residency status, the period of ownership, and eligibility for reliefs, they really are the tip of the proverbial tax ice-berg and many of our clients approach us with situations that they view as extremely complex. We are here to help.

Contact us today for a free consultation.