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Change to UK Capital Gain Tax for Non-Residents

Sun 5th Apr 2015
Change to UK Capital Gain Tax for Non-Residents

British Expats resident in Spain, but who may still own a property in the UK could be affected by changes to the way capital gains tax is calculated, effective from April 6th.

Up until now, upon selling a property UK residents have been charged capital gains tax at either the lower rate of 18% or the higher rate of 28% (depending on their income tax bracket).

A personal allowance of £11,000 can also be taken.

Furthermore, if the vendor has occupied the property as their main home for the full period of ownership , any such 'capital gain' is except from tax.

HMRC also allows an 18 month period of grace if the property being sold was previously the vendors main residence.

UK property sold by non-residents were free from capital gains tax on the provision that the vendor remained non-UK resident for the following 5 tax years.

The capital gains may also still be taxed by the country in which the vendor of the UK property is now resident.

The New UK Capital Gains Tax Rules

As from 6th April 2015, changes to the way in which capital gains taxes are applied to non-residents selling a UK residential property will take effect regardless of how long the vendor has been absent from the UK, but will only apply to property.

The percentage rate at which capital gains tax will be applied will also now be the same as for UK-residents - in other words 18% and 28%, with the 'personal allowance' being tweaked upwards to £11,00.

However, another interesting revision is that the vendor can also the principal private residence relief to a property if they have stayed at the property for at least 90 days over the UK tax year.

This would that capital gains tax would be avoided, but could also mean that the vendor becomes UK resident for tax purposes under the UK's Statutory Residence Test (depending on the other ties, and amount of time spent in the UK), and this would mean exposure to taxes in the UK on any income from Spain.

Recommended Reading :

* Expats face housing tax shock in Spain

* Expats struggle to gain UK mortgage approval

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