Non-residents and capital gains tax

Overview

In general, you are only fully in scope of UK capital gains tax (CGT) if you are resident in the UK. If you are resident in the UK, you may be liable to capital gains tax on disposals of assets located anywhere in the world, not just your assets located in the UK.

However, if you dispose of an asset while temporarily non-UK resident (explained below), you may be liable to capital gains tax in the tax year that you return to the UK. This may apply to you if decide to live abroad for a few years or if you are posted overseas but then return.

Non-resident individuals are also liable to capital gains tax on disposals of UK land or property and certain assets used in a UK trade. We discuss this below.

Temporary non-residence

Very broadly, you will be temporarily non-resident in the UK if all of the following apply:

• You have been resident in the UK for at least four tax years out of the seven tax years prior to departure.
• You leave the UK and become non-resident.
• You then return to the UK after a period of non-residence lasting five years or less.

If there is any doubt over whether or not you have a period of non-residence lasting five years or less, please defer to the detailed rules contained within HMRC’s technical manuals on GOV.UK. Depending on your circumstances, this can be counter-intuitive and may not reflect the period you were physically outside the UK.

If you are temporarily non-resident then, in the tax year of your return to the UK, any gains or losses realised during your period of non-residence (including in an overseas part of a split year), become chargeable to CGT in the tax year of return. These rules aim to prevent people from leaving the UK to dispose of an asset just to avoid CGT. 

You may be able to get double tax relief if you have paid foreign tax on these gains. 

Normally, no tax charge arises if the asset that was sold during the period of temporary non-residence was acquired during that same period. In practice, this means that only disposals of assets held prior to leaving the UK are in scope.

If you have a gain which is brought within scope of UK capital gains tax under the temporary non-residence regime, it is deemed to arise in the year in which you resume UK residence. Your gain would therefore be calculated based on the UK capital gains tax rates that apply in the year you resume UK residence. 

Disposals of UK land and property

From 6 April 2019, non-residents were brought within scope of capital gains tax on disposals of all UK land and property. Prior to this, between 6 April 2015 and 5 April 2019, non-resident capital gains tax (NRCGT) applied to disposals of UK residential property by individuals who were not resident in the UK for the tax year of disposal.

In each case, whether or not you were, or are, temporarily non-resident at the time of the disposal is irrelevant. 

If you are non-resident and you are liable to capital gains tax on a disposal of UK land or property (or, from 6 April 2015 to 5 April 2019, UK residential property) then you may not need to pay tax on the whole gain. However, if you return to the UK within 5 years, this might mean extra tax becomes payable in the year you return. This is a complex area and you should consider taking professional advice.

Disposals of UK residential properties from 6 April 2015

If you owned the residential property before 6 April 2015, then broadly you will only be liable to tax on the part of the gain which has accrued from 6 April 2015. You can choose how to calculate the gain on which the charge is based in one of three ways:

1. On the difference between (a) the amount the property is sold for and (b) its value on 6 April 2015. You will need to establish the value of the property on 6 April 2015.
2. Over the whole period of ownership and then time-apportion it and the part of the gain that relates to the period from 6 April 2015 would be subject to these provisions.
3. If you sold it for less than it cost, then you can calculate the loss over the whole period of ownership, but the way you can use this loss is restricted.

If you wish to choose option 2 or option 3 you need to make an election to do so. If the property was at some point your main home, private residence relief may apply to any chargeable gain calculated under options 1 and 2.

If you purchased the property after 6 April 2015, then the whole gain will be chargeable (subject to main residence relief).

Disposals of other UK land and property from 6 April 2019

If you owned the non-residential land or property before 6 April 2019, then broadly you will only be liable to the part of the gain which has accrued from 6 April 2019. You can choose how to calculate the gain on which the charge is based in one of two ways:

1. On the difference between (a) the amount the land or property is sold for and (b) its value on 6 April 2019. You will need to establish the value of the property on 6 April 2019.
2. If you sold the land or property for less than it cost you then you can calculate the loss over the whole period of ownership, but the way you can use this loss is restricted.

If you wish to choose the second option, you need to make an election to do so.

Note that it is not possible to do a straight-line apportionment in this scenario, as is possible in the case where you sell a UK residential property.

If you purchased the property after 6 April 2019, then the whole gain will be chargeable.

If you sell UK land or property which was partly residential in the period between 6 April 2015 and 5 April 2019, different rules apply. See HMRC’s technical manual on GOV.UK for more information.

Note that you may also have a capital gains tax liability on any gain that is not captured above if you are a temporary non-UK resident.

You can read more about capital gains tax for non-residents on disposals of UK land and property on GOV.UK.

Selling a UK home while non-resident

This is a complicated situation. The first thing to check is that you are definitely non-resident. If you are a UK resident, you will be fully liable to capital gains tax on disposals of assets located anywhere in the world, not just your UK-located assets.

Secondly, note that you must report the disposal within 60 days of completion using HMRC’s Report and pay CGT on UK property service on GOV.UK. Tax will also be payable by the same point if there is any due. If you need to file a self assessment tax return for the year, you will need to ensure that the gains are included even if you have already reported them to HMRC using this service. You will be able to offset the capital gains tax, if any, that you have already paid during the 60 day reporting process when submitting your self assessment tax return.

To calculate the gain to report, there are two steps:

1. You must first calculate the amount of the gain which is in scope of UK capital gains tax (or non-resident capital gains tax, for disposals of UK residential property prior to 6 April 2019).
2. For this part, you must determine how much main residence relief, if any, applies to the gain that is in scope of UK capital gains tax (or non-resident capital gains tax, for disposals of UK residential property prior to 6 April 2019).

Note that you will have the UK annual exempt amount (£3,000 for 2026/27) to offset any gain which is not covered by private residence relief.

If you then return to the UK after a period of temporary non-residence, you will need to consider whether you have a UK capital gains tax liability on the part of the gain which was excluded in step 1 above.

Indirect disposals of UK property and land

Non-UK resident individuals can also be chargeable to UK capital gains tax on certain ‘indirect disposals’ of UK property. We do not discuss these rules here, but you can read more about them in HMRC’s technical manuals on GOV.UK.

Disposal of a UK asset used in a UK trade

Non-residents are liable to capital gains tax on assets situated in the UK if they are carrying on a trade in the UK, and the asset sold is a UK asset that was used in that trade.

You can read more about these rules in HMRC’s technical manuals on GOV.UK.

Overseas tax

Each country may have its own rules on capital gains tax. If you dispose of any asset while you are living outside the UK, you may have to pay tax on any gain that arises in the country where you are living. You will need to take advice locally.

If you are liable to tax on the disposal of the asset in another country as well as the UK, then you may be able to claim double tax relief. There is guidance on GOV.UK. You should seek professional advice in this situation.

More information

See GOV.UK for further information about CGT if you are non-resident, as well as some basic information on tax if you return to the UK after living abroad.

HMRC provide a service via GOV.UK allowing you to send questions about capital gains tax if you are not resident in the UK.

Detailed guidance on how to work out your tax if you sell UK land or property as a non-resident can be found on GOV.UK.

HMRC have produced a helpsheet on GOV.UK to guide you if you think you may be temporarily non-UK resident.

The rules are very complex. You should take further advice from a professional tax adviser or HMRC’s residency unit if you are considering selling an asset and are non-UK resident. You can find out how to contact HMRC residency unit on GOV.UK.