In recent years, HMRC has stepped up its enforcement of capital gains tax on non-residents. The United Kingdom authorities have increased reporting requirements, extended the definition of ‘taxable disposal,’and introduced strict deadlines that apply immediately after a property sale is completed.
Non-UK residents, such as overseas property investors, companies, and their professional advisers, should be familiar with UK reporting requirements on capital gains tax. This is essential to avoid any possible penalties, which may harm their reputation.
This guide explains how capital gains tax for non-UK residents applies, how gains are calculated, and when a non-resident capital gains tax return is required.
Understanding Capital Gains Tax for Non-residents
Under UK law, capital gains tax legislation now applies to non-residents who dispose of UK land and property. Previously, most non-UK residents were outside the scope of the UK CGT regime. However, this position has changed significantly in recent years, bringing many property disposals within the UK tax net.
Today, capital gains tax for Non-residents applies in specific circumstances, particularly in relation to UK land and property. The rules ensure that UK properties are taxed in the UK, regardless of the residency of the owners. HMRC provides detailed technical guidance on non-resident CGT rules on the official page for capital gains tax on UK property.
Disposals within scope typically include:
- Direct sales of UK residential property
- Disposal of UK commercial property or land
- Indirect disposals of “property-rich” companies or structures
Who is Treated as a Non-Resident?
In determining residence for CGT purposes, the Statutory Residence Test is applied.
It is possible to be treated as not living in the UK if one stays only a few days in the UK and does not satisfy any of the automatic UK residence tests.
However, temporary non-residence tests may also apply. One may leave the UK but return soon after.
Residency status should always be confirmed before assessing capital gains tax for non-UK residents.
When Capital Gains Tax Applies to Non-UK Residents
Sale of UK Residential Property
Disposal of UK Commercial Property or Land
Indirect Disposals
Capital Gains Tax on UK Property for Non-Residents
What Counts as UK Property?
HMRC treats the following as UK property for CGT purposes:
- Residential homes and buy-to-let properties
- Commercial premises
- Mixed-use land
- Development sites
The tax rate varies depending on the type of property and the status of the taxpayer:
- Residential property: 18% or 24% (individuals)
- Commercial property: 10% or 20%
- Companies: Corporation Tax rates apply
How Capital Gains Are Calculated for Non-Residents
Accurate calculation is essential for compliance.
The gain is normally calculated as: sale proceeds minus acquisition cost minus allowable expenses.
Allowable expenses can include:
- Legal and professional fees
- Stamp Duty Land Tax
- Capital improvement costs
Rebasing Rules
For non-residents:
- Residential property is reset to April 2015.
- Commercial property is reset to April 2019.
Gains accruing after these dates are taxed under the existing rules.
One of the most common compliance risks is incorrect valuation rebasing.
Capital Gains Tax on Foreign and Overseas Property
The common assumption is that non-residents have to pay UK tax on all their assets worldwide.
In truth, however, capital gains tax on foreign property or capital gains tax on overseas property is not paid under the UK tax system for non-UK residents. But things get complicated in the following circumstances:
- If there is a change in tax residence status
- In cases of temporary non-residence
- In cases of double taxation agreements
Therefore, it is necessary to seek professional advice to ensure that the UK has the right to tax in cross-border cases.
Non-Resident Capital Gains Tax Return Requirements
In areas where UK CGT is relevant, you must file. A non-resident capital gains tax return is typically due within 60 days after the disposal ends.
You must file, even if:
- No tax is payable
- A loss is realised
How to Create a Capital Gains Tax on a UK Property Account
Before making a return, non-residents need to create a capital gains tax on UK property accounts with the help of HMRC’s online system.
The process to follow is as follows:
- Log in to Government Gateway
- Verify your identity
- Create your CGT on the UK property account
- Enter details of disposal
- Calculate and pay your estimated tax
This account is necessary to enable them to submit their tax returns online.
With HMRC continuing to modernise reporting systems, understanding how HMRC Making Tax Digital is transforming UK tax compliance is increasingly important for non-resident investors and advisers.
Key Compliance Checks Before Reporting
Before making a return, non-residents should ensure that:
- CGT reporting requirements are understood
- Accurate valuations are sought
- All documents related to acquisition/disposal are kept
- Reliefs are accurately checked
- Deadlines are recorded in a diary or calendar
Because the reporting deadlines are strict, planning ahead is essential. Businesses involved in cross-border property transactions often benefit from structured audit support services to strengthen compliance controls and reduce inquiry risk.
Common Non-Resident Capital Gains Tax Scenarios
| Scenario | CGT Position |
|---|---|
| Sale of UK residential property | CGT return required |
| Sale of UK commercial property | CGT applies post-2019 |
| Overseas owner selling UK property | UK CGT still applies |
| Property held via a company | Indirect disposal rules may apply |
Each scenario may trigger different reporting and computation obligations. Where property is held through a corporate structure, professional accounting services are essential to align financial reporting with CGT obligations.
How Befree Supports Capital Gains Tax Compliance
For international clients, UK CGT compliance can be complex and time-sensitive.
Befree offers:
- Calculation of capital gains tax for non-resident individuals
- Assistance with UK property capital gains tax
- Assistance with setting up a capital gains tax on a UK property account
- Filing of non-resident capital gains tax return
- Advisory services on double taxation relief
Conclusion
The capital gains tax on non-residents is a highly regulated area of UK tax, especially in relation to UK property.
It is important to correctly identify chargeable disposals, compute the gain correctly, and submit the non-resident capital gains tax return on time. There is a need to impose a capital gains tax on UK property accounts with very tight deadlines, allowing no room for errors.
As HMRC enforcement becomes increasingly stringent, careful planning is vital to ensure confidence, compliance, and continuity for non-resident individuals and businesses operating within the UK tax system. Contact us today to ensure your obligations are handled correctly and efficiently.