Capital Gains Tax (CGT) is calculated in its simplest form for U.K. property as the amount you sell the property minus what you paid for the property. It does have some technicalities but I will address some of them later. In this article, I want to cover what Capital Gains is, how it affects expats, when it is due and how it is paid, especially as an expat.
If you are giving the property away it uses the property’s current market value, in essence, this stops expats from giving it away at a lower market value to a family member and reducing taxes, potentially IHT as well. Also, if you bought a house before the 31th March 1892 the market value is based on that date.
You may be able to reduce the cost for general improvement and cover costs such as legal costs in relation to the property.
When getting the property assessed for CGT you have two options and this can affect expats. You can elect to have it valued on the 6th April 2015 thus CGT tax will be calculated on this date rather than when originally purchased.
Note, expats might have had a property that they lived in prior to moving outside of the U.K. and this can be important as you can claim tax relief for the period of time that you were living in the property.
Finally, expats can elect to have a charitable gain on the sale against the value of the 6th April 2015. Tax relief is only available for 9 months from April 6th 2015 to the date of the sale and only if the property was your prime residence.
When is Capital Gains Due?
60 days this is based on sales after, 27th October 2021 even if no capital gains were made this is still a requirement to report to HMRC.
What Are The Rates?
28% is charged for capital gains tax for those in the higher rate tax bands and 18% for basic rate taxpayers
While other aspects are 10%-20%
The capital gains tax-free limit in 2022, is 12,300 GBP and for joint fillers 24,600 GBP.
UK Capital Gains Tax Rules For British Expats
Not living in the U.K. doesn’t exempt you from CGT. Property for one has always been taxable regardless of where you live.
Now, expats have a five-year rule where you have to be non-resident and they can take advantage of the CGT tax. This is that disposing of any profitable assets (besides property) after the time period.
Although, you are treated non-taxable for income tax as a temporary non-resident for tax purposes for the 5 years and any gains are taxed in the year that you return to the U.K.
If, however, the asset (being non-property related), such as a portfolio investment, was acquired after you had left the UK, any gain realised is not subject to UK CGT.
If you have more questions on this subject please feel free to get in touch by the contact form below or email me at info@investmentsforexpats.com
