Capital gains tax for individuals not resident in the UK
Capital gains tax (CGT) generally only applies if you are resident in the UK. However, in certain circumstances you can also be liable if you dispose of an asset while non-resident in the UK. We explain these on this page.
What are the general rules on when CGT is chargeable?
CGT generally only applies if you are resident in the UK. If you are resident in the UK, you may be liable to CGT on disposals of assets located anywhere in the world, not just your UK-located assets.
However, if you dispose of an asset while temporarily non-resident in the UK, you may be liable to CGT when you return. This may apply to you if decide to live abroad for a few years or if you are posted overseas.
From 2015/16, a separate charge to ‘non-resident CGT’ may apply where non-residents dispose of UK land or property – regardless of whether or not you are temporarily resident outside the UK.
Non-residents are also liable to CGT if they are carrying on a trade in the UK and they dispose of UK assets used in that trade. We do not cover these rules here.
When do the temporary non-residence rules apply?
Very broadly, you will be temporarily non-resident in the UK if:
- you have been resident in the UK for at least four tax years (out of the seven tax years prior to departure); and
- you leave the UK and become non-resident; and
- 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 RDR3 (from page 71). Depending on your circumstances, this can be counter-intuitive and may not reflect the period you were physically outside the UK.
What do the temporary non-residence rules mean?
If you are temporarily non-resident, then in the 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 capital gains tax in the year of return. These are anti-avoidance rules to prevent people from leaving the UK to dispose of an asset just to avoid capital gains tax. You may be able to get some relief if you have paid foreign taxes 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.
For instance, if you went overseas on 1 July 2019 and you were eligible to split the year from this date, then a disposal on, say, 1 September 2019 would not be charged to UK CGT in that year. However, if you return to the UK within five years (say in 2022/23), the disposal will be treated as arising in the year you return – assuming it was an asset you held prior to leaving the UK. Similarly, if you make a disposal during 2020/21 and return to the UK in 2022/23, the disposal will be taxed as a gain accruing in 2022/23.
Non-resident CGT (NRCGT) applies from 6 April 2015 to disposals of UK residential property by individuals who are non-resident in the UK. You can read more about it on GOV.UK.
NRCGT can apply regardless of whether or not you are temporarily non-resident in the UK. From 6 April 2019, it applies to any UK land and property – including your main home (although private residence may apply in this case).
What happens if I sell my home in the UK while non-resident?
This is a complicated situation as you will need to consider the temporary non-residence rules, non-resident CGT and private residence relief. Please refer to our page Capital gains tax on the sale of your home for further information.
What about tax in the country where I am living?
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 foreign tax on any gain that arises. You will need to take advice locally. Any foreign tax that you pay may be used in whole, or in part, against any liability you have to UK CGT in relation to the same disposal.
Where can I find further information?
You can find some basic information on tax if you return to the UK after living abroad on GOV.UK.
GOV.UK has a service allowing you to send questions about capital gains tax if you are not resident in the UK.
HMRC have produced a helpsheet to guide you if you think you may be a temporary 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. You can find out how to contact HMRC Residency unit on the GOV.UK website. You can find an adviser on the Chartered Institute of Taxation website.