UK tax law

Broadly speaking, you will need to consider whether the property is or has ever been your principal residence, whether you are giving it to your spouse, what sort of property it is, and many other factors.

It may sound daunting and complicated (and in a lot of cases, it is!), but, fear not, this is our bread and butter, and we are here to guide you through the process from beginning to end.

We are a UK based accountancy practice specialising in the taxation of UK property for UK and non-resident property owners. With over 22 years‘ experience and clients in 4 continents, our mission is to make the whole process as easy and as stress-free for you as possible, all the while ensuring you remain compliant at all stages.

You may have heard of needing to “file a CGT return” or “paying CGT”, but what is CGT?

CGT stands for Capital Gains Tax, which is a tax charged on capital gains realised on the disposal of an asset by an individual or trust.

• Capital gains are made on the disposal of an asset (such as an investment property) at a value or selling price greater than that when you acquired it.
• Capital losses arise where the disposal is at a value less than that on acquisition. For most transactions, the values are taken as the price paid. Other types of disposal (eg. gifts) are treated the same way by using the open market valuation in place of money paid. Tax is chargeable on capital gains to the extent that they are not covered by exemptions, reliefs or allowances.

• Non-residents are liable to Capital Gains Tax (CGT) on the gain arising after 5th April 2015 on the disposal of UK residential property.
• Non-residents are liable to CGT on the gain arising after 5th April 2019 on the disposal of UK non-residential property.  

Temporary non-residents includes those who are not non-resident for five full UK tax years or more (other criteria may apply). They are liable to Capital Gains Tax under the same rules as UK residents for any disposals of UK property. While they are overseas they will be taxed as non-residents and then on their return, the Capital Gains Tax will be re-calculated as if they had been UK resident at the time of disposal.

It is possible for a non-resident landlord, who is in the UK for more than 90 days in any one UK tax year, to elect for a UK property to be his Principal Residence and obtain substantial tax reliefs from Capital Gains Tax.

However, this is a very high-risk strategy as it may make him UK resident for all tax purposes with financially disastrous consequences.

With effect from 27th October 2021, disposals of UK land or buildings made by non-residents must be reported and the tax paid within 60 days (previously 30 days) of the completion of the disposal.

Reporting disposals

All disposals of UK residential property and non-residential property by non-residents must be reported to HMRC within 60 days (previously 30 days) of completion.

Any tax due must be paid within the same 60 days.

• With effect from 27th October 2021, disposals made by UK residents must be reported and the tax paid within 60 days (previously 30 days) of the completion of the disposal unless the disposal is from one spouse to the other, or the property has been the vendor’s primary residence throughout the period of ownership.

Reporting disposals

UK residents are subject to Capital Gains Tax (CGT) on all gains, after deducting reliefs, that are in excess of the Annual Allowance.

Any tax due must be paid within the same 60 days.

The detailed calculation of the taxable capital gain arising on the disposal of an investment property is complex and should normally be undertaken by a suitably qualified person. Special rules apply where a transaction is not at an arms-length value or is at an undervalue.

• The cost is taken as the headline price or value plus all legal costs, stamp duty survey fees, etc.
• The sale proceeds are the headline price or value less the agent’s fees, legal fees, etc. Exceptionally the market value is substituted for the price paid.
• ‍Some improvement costs may be added to the cost asset and be deducted in calculating the gain.
• The gain is deemed to have accrued evenly over the period of ownership.
• Where a disposal is made by a non-resident of a residential property that was acquired before 5th April 2015 (2019 for non-residential property) it is necessary to arrive at a valuation at that date. To arrive at the notional value at 5th April 2015/2019 non-residents have two choices. Either the gain over the entire period of ownership is time apportioned, OR the actual value at 5th April 2015/2019 is used.  
• Exceptionally, where a non-resident disposes of a UK  property that was acquired before 5th April 2015 (2019 for non-residential property) it is necessary to arrive at a valuation at that date. To arrive at the notional value at 5th April 2015/2019 non-residents have two choices. Either the gain over the entire period of ownership is time apportioned, OR the actual value at 5th April 2015/2019 is used.  
• Exceptionally where the property was acquired before 5th April 2015 (2019 for non-residential property) the value as at 5th April 2015 may be ignored and the Capital Gains Tax calculated as for UK resident, i.e.: calculating the gain or loss over the whole period of ownership.

• Any gain accruing when it was your own Principal Private Residence is exempt.
• Where a gain is made on a property that has at any time been your Principal Private Residence, the gain accruing in a final period of up to 9 months is ignored (18 months for a disposal before 6th April 2020).
• If the property has been your principle private residence and it has been let as residential accommodation there is a further allowance not exceeding the sum of the previous two items and is capped at £40,000. From 5th April 2020 there is a new condition for letting relief. Letting relief applies only if you lived in the property at the same time as your tenants, and the relief is limited to the lower of the Private Residence Relief, £40,000, or the gain from the letting period.
• Other reliefs may be available.
• The cost is deducted from the sale proceeds then the exempt amounts are deducted.
• Then the personal annual exempt amount is deducted.
• Capital gains of individuals arising on the disposal of residential property (after deducting the Annual Allowance) are notionally added to the taxpayer’s other taxable income. To the extent that they would otherwise fall within the basic rate band they are taxable at 18% and the excess is taxable at 24%. The tax rate for gains made on non-residential property is 10%/20%.

• ‍Losses may be set off against gains of the same year.
• Losses may be carried forward and set off against gains of future years. They must be used at the first opportunity and before other reliefs are applied.
• Losses may NOT be carried back against the gains of an earlier year (except from the year of death).

• Special rules restrict the use of losses when they arose in a transaction involving a disposal to a connected person.
• In certain circumstances an individual’s trading losses may be offset against the chargeable capital gains of the same year.

Get in touch today to find out how we can help you with your Capital Gains Tax Return.

‍Spousal transfers do not attract Capital Gains Tax. Each partner is entitled to the Annual Allowance, and each may have some lower rate tax band available. The acquiring spouse is deemed to have acquired his/her share of the property at the same time and (pro-rata) for the same consideration as the donor.

However, the spousal transfer is ineffective if the transfer occurs when the onward sale is in hand. It must be completed well in advance of arranging a sale.