UK Non-Residents: Understanding Tax Residency and CGT on Property Disposals

UK Non-Residents: Understanding Tax Residency and Capital Gains Tax on Property Disposals

If you’re a non-UK resident considering the sale of UK property, it’s vital to understand how UK tax rules apply in respect of the Non-Resident testing. Recent changes to legislation mean that non-residents are now subject to Capital Gains Tax (CGT) on disposals of UK land and property. This guide explains how UK tax residency is determined and what the Non-Resident Capital Gains Tax (NRCGT) rules mean for you when selling UK property.

What Makes You a Non-Resident for UK Tax Purposes?

Your UK tax residency status is determined by the Statutory Residence Test (SRT). This test considers the number of days you spend in the UK, whether you work there, and your ties to the country. If you meet an automatic overseas test, you will usually be classed as a non-UK resident for tax purposes.

Key non-residency rules (at time of writing this post) include:

– Spending fewer than 16 days in the UK in a tax year (if you were previously UK resident).

– Spending fewer than 46 days in the UK (if you were not resident in the past three years).

– Working full-time overseas and spending fewer than 91 days in the UK.

If you don’t meet the automatic tests, HMRC will consider your ‘sufficient ties’ to the UK, such as family, accommodation, and work connections.

Non-Resident Capital Gains Tax (NRCGT) on UK Property

Before April 2015, non-residents were generally not liable for CGT on UK property. However, the rules have significantly changed:

– From 6 April 2015: NRCGT applies to sales of UK residential property by non-residents.

– From 6 April 2019: The rules expanded to include commercial property and indirect disposals (such as shares in entities that derive 75% or more of their value from UK land).

Who Needs to Pay NRCGT?

NRCGT applies to non-resident individuals, companies, partnerships, and trustees. If you dispose of UK land or property, you are required to report the disposal and pay any tax due.

Reporting and Deadlines

Non-residents must report the disposal of UK property and pay any tax due within 60 days of completion. This is done via a Non-Resident Capital Gains Tax Return submitted to HMRC. Failure to report on time may result in penalties and interest charges.

How to Calculate the Gain

When calculating your gain, you can use different methods depending on when the property was acquired:

– For residential property bought before 6 April 2015: choose between rebasing to April 2015, time-apportionment, or using the whole gain.

– For other property brought into scope from April 2019: rebasing to April 2019 or calculating the full gain.

Reliefs and Allowances for Non-Residents

Non-residents may still benefit from certain reliefs such as:

– Private Residence Relief (PRR)

– The annual exempt amount for CGT

– Capital losses from other UK property disposals

Beware of Temporary Non-Residence Rules

If you were previously UK resident and return within five years, gains made while non-resident may still be taxed. This is known as the ‘temporary non-residence rule’ and is particularly important for former UK residents.

Conclusion

For non-UK residents, selling UK property can trigger significant tax implications. Understanding whether you are classed as non-resident under the Statutory Residence Test and knowing the NRCGT rules will help you stay compliant and avoid unexpected tax bills. If you are planning to dispose of UK property, professional advice is recommended to make the most of available reliefs and allowances.