Do Non Resident Landlords pay Capital Gains Tax?

Non resident landlords generally qualify for capital gains if they sell property in the UK.

If you make a profit, ‘gain’, when you sell any property and land in the UK that is not your main home, then you should be liable to pay non resident capital gains tax in the UK.

This includes inherited property, land, business buildings and buy-to-lets.

Property is treated differently to other UK assets when it comes to capital gains tax.

Whether or not you must pay capital gains tax on selling other UK assets comes down to the question of your residency status and HMRC have a statutory residence test to define this.

Capital Gains Tax for Non Resident Landlords

From April 6 2019 individuals who are not residents in the UK became subject to capital gains tax (CGT) on the sale of any UK land or property falling into line with UK resident landlords.

If you bought a property on or after April 6 2019 then the entire gain is typically subject to capital gains tax.

Before this date, between April 6, 2015, and April 5, 2019, non resident CGT (NRCGT) was applicable only to disposals of UK residential property by individuals who were not residing in the UK during that tax year.

Regardless of whether you are temporarily non resident or not at the time of disposal, it is important to note that this does not affect your liability for CGT or NRCGT prior to April 6th 2019 when you sell a property.

If you are a non resident landlord and have an obligation to pay CGT specifically from April 6th 2015 until April 5th 2019 it’s worth noting that you may not be required to pay tax on the entire capital gain.

Non Resident Landlord Capital Gains Tax Rates

If your total taxable UK gains and income exceed the income tax basic rate band you will be subject to a 28% capital gains tax for residential property.

If  your UK capital gains and income fall below the basic rate threshold, the CGT rate is reduced to 18%.

You can use the free HMRC capital gains tax for non resident landlords calculator to help work out your potential CGT bill.

What is the Non Resident Capital Gains Tax Allowance?

If you are subject to capital gains tax in the UK, you will receive an annual tax-free allowance called the annual exempt amount (AEA), unless you are a non domiciled individual who has opted for the remittance basis of taxation on foreign income and gains.

Capital gains tax is only applicable if your total gains for the tax year (after subtracting any losses and applying relevant reliefs) exceed the annual exempt amount.

The allowance is worth £6000 per tax year for one individual from April 2023 which reduces to £3000 on the same basis from April 2024.

What is my residency status for CGT purposes?

One of the many confusing factors is that you could be non resident for income tax, but also temporarily non-resident for capital gains purposes for five years.

The latter means that you pay tax on any gains you make, if you come back to the UK during that five years and you are liable to pay in the year you return.

In other words, to avoid paying capital gains tax on profits from the sale of UK assets (excluding property), you generally must be resident outside of the UK for at least five years.

When will I be liable for Capital Gains Tax?

For assests other than UK property an individual who has been or is resident in the UK for any four or more of the last seven years, and then becomes non resident for less than five years, will still be liable to pay capital gains tax on the disposal of any assets they owned before leaving the UK.

As you can see, disposal of the assets (other than property) would need to be planned way ahead.

You are not generally liable to pay CGT if you purchase the asset (excluding property) once you left the United Kingdom if you are still not resident in the UK when it is sold. Also, double taxation treaties can affect your CGT position.

Sometimes this tax becomes payable in your country of residency, rather than the UK. You can optimise your tax position by comparing the rates of the two countries and plan to pay the lower tax rate.

Non Resident Landlord Capital Gains Tax Return

If you have recently sold or transferred property or land in the UK as a non-resident, it is crucial that you inform HMRC within 30 days of the conveyance being completed.

This applies regardless of whether you had any tax obligations, incurred losses, or were already registered for self assessment.

If you have sold property recently and not yet submitted your non resident capital gains tax return it is imperative that you do so promptly.

In addition to filing your non resident capital gains tax return within the 30-day timeframe, it is also necessary to make payment for any outstanding non resident capital gains tax during this period.

Failure to meet this deadline may result in HMRC penalties and interest charges being levied against you.

Non Resident Landlord self assessment tax return

When you complete your non resident self assessment return for the year you need to enter the details relating to your capital gains tax liability in the SA summary page SA108.

As part of filling in the capital gains summary pages on form SA108 you will need to provide information about your non-resident capital gains on disposals of UK property or land starting from box 52.1 onwards.

Make sure to enter the reference numbers for the non resident capital gains tax returns that were submitted during the year in the additional information section located at the end of the SA108 form.

Capital Gains Tax planning can help

It is advisable to get some assistance before you dispose of an asset in the UK.

Finding out the best way to sell as asset in UK for CGT purposes can help you make an informed decision and reduce your UK tax liability where possible.

HMRC provides an online service for non residents which let’s you ask them questions about CGT in the UK.

You can also consult with a professional before completing any declaration or calculating capital gains tax.

A non resident CGT specialist can help determine your non residency status and then help you determine the most effective strategy for minimising your capital gains tax liabilities.