Capital gains tax for individuals not resident in the UK
Other tax issues
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 sell an asset while non-resident in the UK.
What are the general rules on when CGT is chargeable?
In general, you are only fully in scope of UK CGT if you are resident in the UK. Note that 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 assets located in the UK.
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.
Non-resident individuals are also liable to CGT on disposals of UK land or property. See below for more information.
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 HMRC’s technical manuals. 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 2020 and you were eligible to split the year from this date, then a disposal on, say, 1 September 2020 would not be charged to UK CGT in that year. However, if you return to the UK within five years (say in 2023/24), 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 2021/22 and return to the UK in 2023/24, the disposal will be taxed as a gain accruing in 2023/24.
If you have a gain which is brought within scope of UK CGT under the temporary non-residence regime, it is deemed to arise in the year in which you resume UK residence. You would therefore have an annual exemption (£12,300 for 2020/21) available for that year.
Non-resident CGT (NRCGT) applied to disposals of UK residential property from 6 April 2015 to 5 April 2019 by individuals who were not resident in the UK for the tax year of disposal. From 6 April 2019, NRCGT was abolished and non-residents were instead brought within scope of ‘normal’ CGT on disposals of all UK land and property.
In each case, whether or not you were, or are, temporarily non-resident at the time of the disposal is irrelevant. You might therefore need to pay some CGT (or NRCGT, as the case may be) when you dispose of the property and again when you return to the UK.
If you are non-resident and you are liable to CGT 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.
Note, however, that you will be required to report the disposal to HMRC within 30 days in all cases, regardless of how much tax is due. See Capital gains tax reporting and record-keeping for more information.
Disposals of UK residential properties from 6 April 2015
If you owned the 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:
- On the difference between (a) the amount the property is sold for and (b) its value at 6 April 2015. You will need to establish the value of the property at 6 April 2015; or
- 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; or
- If you sold it 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 options 2 or 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 private residence relief).
Disposals of UK land and property (other than UK residential property) from 6 April 2019
If you owned the 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:
- On the difference between (a) the amount the land or property is sold for and (b) its value at 6 April 2019. You will need to establish the value of the property at 6 April 2019; or
- 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 option 2 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 6 April 2015 and 5 April 2019, different rules apply. See HMRC’s technical manual 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 CGT for non-residents on disposals of UK land and property on GOV.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.
What happens if I sell my home in the UK 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 CGT on disposals of assets located anywhere in the world, not just your UK-located assets.
Secondly, note that you must now report the disposal within 30 days of completion using HMRC’s new Report and pay CGT on UK property service. Tax will also be due 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. For more information, see How do I report capital gains to HMRC?.
In order to calculate the gain to report, there are two steps:
- You must first calculate the amount of the gain which is in scope of UK CGT (or NRCGT, for disposals of UK residential property prior to 6 April 2019).
- For this part, you must determine how much private residence relief, if any, applies to the gain which is in scope of UK CGT (or NRCGT, for disposals of UK residential property prior to 6 April 2019).
Note that you will have the UK annual exemption (£12,300 for 2020/21) 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 CGT liability on the part of the gain which was excluded in Step 1 above.
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.
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. You should seek advice in this situation.
Where can I find further 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 provides 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 our your tax if you sell UK land or property as a non-resident can be found on GOV.UK.
HMRC have produced a helpsheet 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. You can find out how to contact HMRC Residency unit on GOV.UK.