Residential Property Capital Gains Tax
When disposing of a dwelling in the UK, Capital Gains Tax applies. If you were the property owner on April 5, 2015, the assessable gain is calculated from that date to the date of disposal.
Private Residence Relief might be applicable if you’ve lived in the property at any time, and there’s an annual exemption to offset against the gain. If you owned the property on April 5, 2015, you have three options:
- Opt for the default position, which is to claim the market value of the property on April 5, 2015, against the sale proceeds. The gain or loss is the difference between the sale proceeds (after deducting costs) and the April 5, 2015, market value (plus any enhancement expenditure afterward). If the property was your principal private residence before April 5, 2015, you can claim the last 9 months.
- Choose to time apportion the gain over the entire ownership period, with the chargeable amount related to after April 5, 2015.
- Choose the retrospective basis, considering the entire gain or loss. You might prefer this option if there is a loss or if principal private residence relief yields a lower gain over the entire period.
Please note that once you make the elections in options 2 and 3, they are irrevocable.
Non-Residential Property Capital Gains Tax (After April 5, 2019)
When disposing of a commercial building, land, or shares in a company where you own 25% or more of the shares and 75% or more of the company’s assets are land and/or buildings in the UK, Capital Gains Tax applies. If you owned the property on April 5, 2019, the assessable gain is calculated from that date to the date of disposal.
You have two options:
- Choose the default position, which involves claiming the market value of the property on April 5, 2019, against the sale proceeds. The gain or loss is the difference between the sale proceeds (after deducting costs) and the April 5, 2019, market value (plus any enhancement expenditure afterward).
- Opt for the retrospective basis, where the entire gain or loss is taken into account. This option might be suitable if there is a loss, but you couldn’t claim the loss on the disposal of shares in a company.
Capital Gains Tax Considerations for All Cases
If you spend less than five full tax years as a non-resident, the tax authorities may impose capital gains tax on any profits you generate from assets (excluding dwellings sold after April 5, 2015, other immovable property sold after April 5, 2019, or assets used in a UK trade) while you are abroad in the year of your return, unless you acquired and disposed of those assets after becoming a non-resident.
With the exception of dwellings sold after April 5, 2015, other immovable property sold after April 5, 2019, or assets used in a UK trade, there is no Capital Gains Tax for non-residents returning to the UK after five tax years.
Important Tax Reporting Deadline
It’s crucial to make a return of the disposal of land and buildings and pay the Capital Gains Tax within 60 days of completing the sale. This requirement stands regardless of whether you complete a self-assessment return or not.
Additionally, it’s advisable to confirm your tax reporting obligations in the country where you reside with a local tax advisor.
For further information on UK Capital Gains Tax and related regulations, you may find the official UK government page on Capital Gains Tax useful. Here’s the link:
UK Government Capital Gains Tax Information
DISCLAIMER
The above information is provided for guidance purposes only and may not cover your specific circumstances. Therefore, it’s essential to seek appropriate professional advice that takes into account your unique situation, providing all relevant facts and documents.