Capital Gains Tax
The basics of tax when you dispose of UK property.
CGT (Capital Gains Tax) for non-resident landlord
Tax returns for the non-resident property landlord. Making UK tax easy for property owners. Whether you are a UK landlord or a non-resident landlord, Landlords Tax Services provide a complete property tax service which ensures your UK tax affairs are dealt with on time and worry-free. We do it all online and for a fixed fee. No surprises. No stress. Landlords Tax Services offer the easy, professional way to deal with the UK tax obligations of landlords. UK property tax laws are ever-changing and, with more and more people becoming investors and landlords of properties in the UK, Landlords Tax Services have created an easy to use service aimed at providing new or experienced landlords with an efficient system to fulfil their UK property tax needs. Tax Returns for landlords of UK property: the complete tax service for residential property landlords. Our UK based landlord tax accountants can help you comply with UK property tax laws wherever you are in the world. We provide an online, fixed fee property tax service that ensures that the UK tax liability of landlords is kept to a minimum. Our mission is to deal with all our clients’ tax affairs on time and with no stress.
Owners of UK rental property who live outside the UK are obliged to register for UK taxes whether any tax is due or not. The UK has Tax Treaties with over 130 other countries. These treaties generally include sections designed to prevent the same income being taxed twice. Usually the UK will tax UK rental income first and the other country will allow you to deduct the UK tax from the local tax up to an amount equal to the local tax. Tax returns for the UK property landlord. British and EEA citizens living anywhere in the world, along with many other people living in the country of which they are citizens, are entitled to the UK “Personal Allowance”, a £0% rate band that means the first £12,570 of profit from rental may be free of tax in the UK, and profits between £12,570 and £50,270 are taxed at 20%. Higher rates apply to UK income in excess of £50,270 (2024-25 rates).
CGT (Capital Gains Tax) for non-resident landlord
Capital gains are made on the disposal of an asset (such as an investment property) at a value or selling price greater than that when you acquired it. Capital losses arise where the disposal is at a value less than that on acquisition. For most arms-length transactions, the values are taken as the price paid. Other types of disposal (eg.: gifts) are treated the same way by using the open market valuation in place of money paid. Tax is chargeable on capital gains to the extent that they are not covered by exemptions, reliefs or allowances.
Persons liable to Capital Gains Tax
- Non-residents are liable to Capital Gains Tax (CGT) on the gain arising after 5th April 2015 on the disposal of UK residential property.
- Non-residents are liable to CGT on the gain arising after 5th April 2019 on the disposal of UK non-residential property.
Temporary non-residents are those who are not non-resident for five full UK tax years or more. They are liable to Capital Gains Tax under the same rules as UK residents for any disposals of UK property. While they are overseas they will be taxed as non-residents and then on their return, the Capital Gains Tax will be re-calculated as if they had been UK resident at the time of disposal.
It is possible for a non-resident landlord, who is in the UK for more than 90 days in any one UK tax year, to elect a UK property to be his Principal Residence and obtain substantial tax reliefs from Capital Gains Tax. However, this is a very high risk strategy as it may make him UK resident for all tax purposes with financially disastrous consequences.
With effect from 27th October 2021, disposals made by non-residents must be reported and the tax paid within 60 days (previously 30 days) of the completion of the disposal.
CGT (Capital Gains Tax) for non-resident landlord
CGT (Capital Gains Tax) for non-resident landlord
Reporting disposals
All disposals of UK residential property and non-residential property by non-residents must be reported to HMRC within 60 days (previously 30 days) of completion. Any tax due must be paid within the same 60 days.
Calculating capital gains and losses on the disposal of investment property
The detailed calculation of the taxable capital gain arising on the disposal of an investment property is complex and should normally be undertaken by a suitably qualified person. Special rules apply where a transaction is not at an arms-length value or is at an undervalue.
- The cost is taken as the headline price or value plus all legal costs, stamp duty survey fees, etc.
- The sale proceeds are the headline price or value less the agents fees, legal fees, etc. Exceptionally the market value is substituted for the price paid.
- Some improvement costs may be added to the cost of the asset.
- The gain is deemed to have accrued evenly over the period of ownership.
- Where a residential property was acquired before 5th April 2015 (2019 for non-residential property) it is necessary to arrive at a valuation at that date. To arrive at the notional value at 5th April 2015/2019 non-residents have two choices. Either the gain over the entire period of ownership is time apportioned, OR the actual value at 5th April 2015/2019 is used.
- Exceptionally where the property was acquired before 5th April 2015 (2019 for non-residential property) the value as at 5th April 2015 may be ignored and the Capital Gains Tax calculated as for UK resident, i.e.: calculating the gain or loss over the whole period of ownership.
- Any gain accruing when it was your own Principal Private Residence is exempt (pp_rlf).
- Where a gain is made on a property that has at any time been your Principal Private Residence, the gain accruing in a final period of up to 9 months is ignored (18 months for a disposal before 6th April 2020).
- If the property has been your principle private residence and it has been let as residential accommodation there is a further allowance not exceeding the sum of the previous two items and is capped at £40,000. From 5th April 2020 the new conditions for relief mean that it is very unlikely that non-residents will be able use this relief (Letting Relief).
- Other reliefs may be available.
- The cost is deducted from the sale proceeds then the exempt amounts are deducted.
- Then the personal annual exempt amount is deducted.
- Capital gains of individuals arising on the disposal of residential property (after deducting the Annual Allowance) are notionally added to the taxpayers other taxable income. To the extent that they would otherwise fall within the basic rate band they are taxable at 18% and the excess is taxable at 28%. The tax rate for gains made on non-residential property is 10%/20%.
Treatment of losses arising on the disposal of investment property
- Losses may be set off against gains of the same year.
- Losses may be carried forward and set off against gains of future years. They must be used at the first opportunity and before other reliefs are applied.
- Losses may NOT be carried back against the gains of an earlier year (except from the year of death).
- Special rules restrict the use of losses when they arose in a transaction involving a disposal to a connected person.
Get in touch today to find out how we can help you with your Capital Gains Tax Return.
CGT (Capital Gains Tax) for non-resident landlord
Calculating capital gains and losses on the disposal of investment property
The detailed calculation of the taxable capital gain arising on the disposal of an investment property is complex and should normally be undertaken by a suitably qualified person. Special rules apply where a transaction is not at an arms-length value.
Treatment of losses arising on the disposal of investment property
- Losses may be set off against gains of the same year.
- Losses may be carried forward and set off against gains of future years. They must be used at the first opportunity and before other reliefs are applied.
- Losses may NOT be carried back against the gains of an earlier year (except from the year of death).
- Special rules restrict the use of losses when they arose in a transaction involving a disposal to a connected person.
- In certain circumstances an individuals trading losses may be offset against the chargeable capital gains of the same year.
Transfers between husband and wife, or those in a civil partnership
Spousal transfers do not attract Capital Gains Tax. Each partner is entitled to the Annual Allowance and each may have some lower rate tax band available. The acquiring spouse is deemed to have acquired his/her share of the property at the same time and (pro-rata) for the same consideration as the donor. However the spousal transfer is ineffective if the transfer occurs when the onward sale is in hand. It must be completed well in advance of arranging a sale.
