Changes from the start of this tax year mean that Britons living abroad are now subject to Capital Gains Tax (CGT), whereas before the new legislation was introduced on April 6, it was possible for expats to sell their property tax-free before returning home.
However, these people can still reduce the size of their future CGT bill, as the profit is calculated on the increase in the property’s value from April 6. To do this, they should get an independent valuation in writing by a chartered surveyor or local estate agent as soon as possible in case the taxman asks for proof of the value once the property is sold. A non-UK resident could also attempt to obtain a retrospective valuation, but this would be more complex, time-consuming and costly.
Once the property is sold, the individual will need to fill out a Non-Resident Capital Gains Tax (NRCGT) return and tell the taxman within 30 days of completing the sale, regardless of whether they have made a profit or not.
The amount of CGT to be paid on the sale depends on the individual’s tax rate. This tax year basic rate taxpayers will be charged 18 per cent on any gain, while higher and additional rate taxpayers will pay 28 per cent.
For example, if they bought a property in the UK for £250,000 in 2005, which is valued at £500,000 now and sold for £600,000 in 2017, they would only have to pay CGT on the £100,000 it had increased in price since April this year.
Based on this, a basic rate taxpayer would pay £18,000 minus their annual CGT exemption, which is currently £11,100 and expenses, while those in the higher tax bands would pay £28,000 minus their CGT allowance and expenses. If the property is held in a trust, the trustees have a CGT exemption of £5,500, while those held in a company have no exemption.
In order for expats to pay no CGT, the property would have to be classed as their Principal Private Residence (PPR) for tax purposes. To do this, they or their spouse must live in the UK home for at least 90 days a year.
Alternatively they could return to the UK and live in the property before selling, which would provide partial PPR relief. However, this involves a complex method of calculation and almost certainly requires professional help.
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