There are a lot of tax issues that come up when you sell a property abroad, and they can be more complicated if the property is overseas. We can help with this.
People often make the mistake of not reporting to the UK the profit they made when they sold a home abroad. People often think that they don’t need to report or pay tax in the UK because they already pay tax on their property abroad and foreign tax is already paid.
UK citizens are usually taxed on all of their income and gains made outside of the UK.
What does it mean to live in the UK?
In basic words, being in the UK for 183 days during the tax year. However, there are rules that tell you what your tax residence status is even if you have been in the UK for less than this amount of time.
What overseas property means
Any stake in real estate that is not in the UK is called overseas property. Because of this, it doesn’t matter if you own the property directly in your own name or indirectly through a trust, a nominee, or something similar in a foreign country.
Status of residence
Your home country would be the UK if you were born there. Dwelling in the UK also means that you have lived there for more than 15 years. It is possible to change your residency status, but the steps can be hard to follow.
Residents with a home—CGT rules
If you live and work in the UK, you will be taxed on all of your income and gains from anywhere in the world. So, whether you’re in the UK or another country, you will have to report and pay tax on a home sale in the same way.
Not residing in the country and income base
You can choose to use the payment base if you are a non-domiciled person. In that case, you are only taxed on income that comes from the UK and money that you send back to the UK. This means that the money from the sale of the property abroad would not be taxed in the UK if it is not brought into the country. Please keep in mind that this claim and what it means to send money back have larger implications. Before choosing to do this, you should talk to a professional.
How about tax money sent abroad?
If you sell a house in another country, you will probably have to pay taxes in that country. Many countries have double tax deals with the UK. This means that you won’t have to pay tax twice, but you should still get advice because each country has its own tax contract with the UK.
Figuring out how much tax You owe
When figuring out income for tax reasons, the rules aren’t always the same outside of the UK. Don’t assume that the numbers your accountant uses outside of the UK will be the same as the numbers you can use in the UK.
In the UK, you can get tax breaks for both the original purchase price and the costs of improvements made to the property. You can also get extra tax breaks for professional costs spent during the sale, but these extra tax breaks change from country to country.
For most people who live in the UK, there is a yearly exempt amount of £6,000 (which will drop to £3,000 in the 2024–25 tax year) that can be used to cover all of their capital gains in a tax year. The rest of the gains will be taxed at CGT rates of 10%, 18%, 28%, or 20%, based on the person’s taxable income and the type of asset being sold.
On the other hand, if the sale results in a capital loss, it can be used in the same way as any other capital loss.
Effects on the exchange rate
Your self-assessment return is given to you in GBP, but if you’re selling a house in another country, the deal will probably be made in a different currency. Because of this, you will need to think about the exchange rates.
Because exchange rates change all the time, this could affect whether you gain or lose money. To figure out how much CGT the gain will cost, HMRC will use the exchange rate that was in effect on the date of purchase and sale to turn the foreign currency.
The 60-day rule only applies to sales of property in the UK.
People must report and pay CGT on the sale of their home within 60 days of the closing date. Please remember that this only applies to homes in the UK and not those in other countries.
If you live in the UK and sell a home in another country, you may have to pay UK CGT. However, there are rules that let you remove foreign tax credits from your tax bill. In your self-assessment form, you should tell HMRC about this.
