Expat UK Property Capital Gains Tax Saving
Published / Last Updated on 14/10/2022
In 2018, we posted a video about rules for Expat and non-UK resident UK property owners and Capital Gains Tax (CGT) that started in 2015.
See CGT Non Res
In April 2015, rather than CGT only being paid by UK residents on investment property disposal, it became law that all were liable to UK CGT on disposal whether UK tax resident or not. For non-UK residents, there are two methods and one sub-method for calculation of CGT:
Total Gains Method
Selling price today less all expenses/property improvements and purchase price from day one of ownership = Taxable gain.
- Straight line apportionment method – as above but if you had lived in the property as your main residence than the proportion of time that you lived in and owned the property is tax free plus that last nine months of ownership (whether you were living in it or not). E.g., owned property for 10 years, 5 years you lived in it for final 5 years it was rented out = 5 years as owner/resident and last 9 months are tax free i.e., that proportion of the gain is tax fee, and the remaining proportion of 4 years and 3 months (despite 5 years non-resident) is the proportion of capital gain that is taxable.
Rebasing Method
You use the value of the property as of April 2015 as the starting point for the calculation (i.e., rebased) less expenses incurred since 2015 only (you cannot use any expenses incurred before April 2015) and the actual value you sell for to work out the gain.
If you do not know what the value of the property was in April 2015, you can back date prices from the current valuation using a relevant, well know property index such as Halifax. Nationwide, Royal Institute of Chartered Surveyors or Office for National Statistics to get a reasoned and acceptable estimated valuation to satisfy HMRC.
Recent Example
Whilst doing some CGT work for an expat client selling a UK property. The results found that
- The Total Gains Route combined with Straight Line Apportionment resulted in a capital gains tax bill of £62,500
- The Rebasing Method calculation resulted in a capital gains tax bill of £8,500.
What this demonstrates is that if you are overseas and you dispose of a UK property, you should use all calculation methods to establish the right route for you. In most cases so far, we have found the rebasing method good for gains but where losses have been made, we have found the Total Gains route to bring the biggest losses. Whilst you do not get a tax refund on losses, you are allowed to carry forward losses indefinitely so that if you ever make UK property gains in the future, you can offset prior losses against profits.
