- Capital Gains Tax for Expats
- New rules on Capital Gains Tax from April 6th 2020
- What rules are changing?
- Capital Gains Tax rules for British expats and non-UK residents with a UK property
- Assets liable for Capital Gains Tax
- UK Capital Gains Tax rates
- UK Capital Gains Tax rules for British expats
- Capital Gains Tax reliefs
- Absorption of capital losses
- Capital gains tax allowance
- Other capital gains tax exemptions
- Capital gains tax declarations when selling property as a non-resident
- Capital Gains Tax calculator for tax year 2020/21
- Request a free introduction to a UK tax specialist
- What Is the Capital Gains Tax Rate?
- Long-Term Capital Gains Tax
- Short-Term Capital Gains Tax
- What Is a Capital Gain?
- What Are Capital Losses?
- How Are Capital Gains Taxes Calculated?
- Exceptions to Capital Gains Taxes
- Capital Gains Taxes on Owner-Occupied Real Estate
- Capital Gains Taxes on Collectibles
- What Is the Net Investment Income Tax?
- Who Owes the Net Investment Income Tax?
- Capital Gains Tax
- What is an asset?
- How are assets disposed of?
- Capital gains exempt from Capital Gains Tax
- Payment of CGT
- Payment of Capital Gains Tax
Capital Gains Tax for Expats
Capital Gains Tax is the tax which is due as a result of the financial gain (often referred to as profit) received once an asset is sold or disposed of.
The total gain is calculated by subtracting the sale value from the original purchase value.
For example, if you are selling a residential property, the sale value will normally be the sale price or, in some cases, the market value which the property could be reasonably expected to sell for in an open market.
Market value is applied when you give the property away, for example, or sell it at a reduced cost or pass it to a connected person (such as a family member).
For assets acquired before 31st March 1982, the market value as at this date will be applied.
It may also be possible to deduct the costs of any improvements made to the property during ownership. These costs may include advice received, general improvements (but not decoration or maintenance) and other legal and professional costs incurred.
Once the total gain has been calculated, any tax relief and tax-free allowances are taken into account before calculating the Capital Gains Tax charge, using the appropriate rate.
Non-domiciled foreign national, or expat, living in the UK? Please read our guide to the UK tax requirements of «non-doms» in the UK.
New rules on Capital Gains Tax from April 6th 2020
New rules from HMRC on capital gains tax came into effect from April 6th 2020, affecting mainly those buy-to-let landlords and second homeowners in the UK, who are selling properties that are not listed as their principal home residence, with the requirement for CGT to be reported and paid within 30 days of the sale taking place.
What rules are changing?
From April 6th 2020, those selling their properties will need to pay the full amount owed within 30 days from the completion date of the sale.
If you are selling a property that has been your main residency in the past, you will qualify for tax relief for the period of time you lived in the property over the whole ownership period.
For non-UK residents, selling UK property, there is the option to have the chargeable gain on the sale assessed against the 5 April 2015 market value of the property but when electing to do so, tax relief is available for 9 months only of the total period of ownership from 6 April 2015 to date of sale, if the property was once your main residence. (Prior to 6 April 2015, no CGT was due from non-UK resident on UK property disposals. This is discussed in greater detail below.)
If you are unsure of how the changes will directly affect you, it is vital that you seek professional assistance from a specialist in non-resident tax affairs. We can assist you by introducing you to a tax specialist from our network who will ensure that you are paying the correct amount of tax.
Capital Gains Tax rules for British expats and non-UK residents with a UK property
The rule, which came into effect on April 6, 2015, particularly affects British expats and non-UK residents with UK property interests, and especially those with buy-to-let agreements which generate an annual income.
While it is possible to be assessed for CGT on the original value of the residential property, you may elect to have the gain assessed on the 5 April 2015 market value of the property if owned before this date.
Hence CGT will be calculated on the value of the property on the day prior to the introduction of the new tax rule for non-residents from the start of the 2015/16 tax year.
Where possible, therefore, it is recommended that you seek a professional opinion on the property value as at 5 April 2015 to establish an accurate understanding of the gain/loss made from this date to date of sale.
Assets liable for Capital Gains Tax
Assets which are liable for Capital Gains Tax include all forms of property (unless specifically exempt), certain gifts made, sale of assets acquired by inheritance, shares and assets transferred through divorce, or civil partnerships which have been dissolved.
UK Capital Gains Tax rates
In the UK, Capital Gains Tax for residential property is charged at the rate of 28% where the total taxable gains and income are above the income tax basic rate band. Below that limit, the rate is 18%.
For trustees and personal representatives of deceased persons the rate is 28%.
For non-residential property and other assets, the rates are 10% and 20% for individuals.
When selling a non-publicly listed business, if you are eligible, you may benefit from the equivalent Entrepreneurs' Relief scheme under which you will only have to pay 10% on the sale of a business or business shares. However this has been subject to recent change and will be addressed separately and not in this particular section.
UK Capital Gains Tax rules for British expats
It used to be the case that by simply leaving the UK for a complete tax year, and then disposing of any profitable assets (although different rules have always applied for property) during that year, you could be exempt from Capital Gains Tax. However, one year is no longer a sufficient length of time and an individual now has to be non-resident for a minimum of five complete UK tax years to take advantage of this rule.
Proper planning is clearly very important in these situations as timing can make a significant difference in your tax liability.
Even though you may be deemed non-resident for income tax purposes, you are treated as temporarily non-resident for capital gains tax purposes for up to 5 years.
Certain gains made during that time are taxed in the year you return to the UK if within five years.
If, however, the asset (being non-property related), such as a portfolio investment, was acquired after you had left the UK, any gain realised is not subject to UK Capital Gains Tax if you are indeed non-UK resident.
When double taxation agreements are taken into account, capital gains may be completely exempt from UK tax but taxable in the country where you reside.
Capital Gains Tax reliefs
There are several different tax reliefs which can reduce the chargeable gain:
- Rollover/holdover relief on replacement of business assets – which allows you to defer the CGT on the gain of a business asset, where this is matched with a replacement of a new business asset in the period commencing one year before and ending three years after the disposal.
- Business incorporation relief — available when you transfer your business into a Limited Company in exchange for shares.
- Holdover gift relief — on some gifts of business assets, or gifts made into trusts, whereby tax does not become payable until the person, or trustee, who receives the gift disposes of it.
- Entrepreneurs' relief — for disposals after 5th April 2008. This allows disposal of a material part or all of your business to have the CGT rate reduced to 10%. There is a lifetime limit which from 6 April 2020 is £1million (which has only recently been reduced from £10million).
Absorption of capital losses
Any capital losses made on a chargeable transaction are netted off against any capital gains made in the same tax year. They are applied before the annual exemption.
Unused capital losses are carried forward against future capital gains; they cannot normally be carried back.
To make use of a capital loss it must be reported to HMRC within five years and ten months of the end of the tax year in which it arose.
Capital gains tax allowance
An annual exemption of £12,300 for the tax year 2020/21 is available to individuals and therefore total gains made in the tax year up to this amount are exempt. Any unused annual exemption is lost and cannot be carried forward or transferred to another person.
Previous years capital gains tax allowances:
- 2019/20: £12,000
- 2018/19: £11,700
- 2017/18: £11,300
- 2016/17: £11,100
- 2015/16: £11,100
- 2014/15: £11,000
Other capital gains tax exemptions
- Normally the sale of your only or main residence is exempt, although it can become partly chargeable in some circumstances where it is let out or used for business purposes;
- Transfers of assets between husband and wife or civil partners. Such transfers are normally treated as being made at no gain/no loss;
- Most chattels whose value decreases over time (called wasting assets);
- Non-wasting and business chattels where acquisition cost and disposal proceeds do not exceed £6000;
- Certain private motor cars;
- Gifts to charity and certain amateur sports clubs;
- SAYE contracts, savings certificates and premium bonds;
- Betting winnings and prizes including the lottery;
- Compensation for damages for personal or professional injury;
- Some compensation pay-outs for miss-sold pensions;
- Life assurance policies in the hands of the original owner or beneficiaries;
- Company reorganisations and takeovers where there is a share for share exchange.
Capital gains tax declarations when selling property as a non-resident
Since the new rules came into force in April 2015 as a non-resident, when you sell a UK residential property you must tell the HMRC, even if you have no capital gains tax to declare. This also applies if you are selling, or have sold, your main residence.
Failure to correctly make a capital gains tax declaration to the HMRC within 30 days after conveyancing (transferring ownership of) your property is ly to result in a penalty – even if there is no capital gains tax to pay.
We always recommend that you seek professional advice before finalising any declaration or capital gains tax calculation.
Capital Gains Tax calculator for tax year 2020/21
We have created a Capital Gains Tax calculator that will provide you with an estimate of how much capital gains tax you would have to pay on the sale of a property or the disposal of shares.
While created as a guide only, it provides a useful breakdown of how your capital gains tax is calculated.
Try our capital gains tax calculator here >
Request a free introduction to a UK tax specialist
If you have a UK property, or other assets, in the UK which you are considering selling, you should seek qualified advice about your best course of action to mitigate any unnecessary Capital Gains Tax bills.
Our free introduction service enables you to have a free consultation with a UK tax specialist that has expert understanding of UK tax rules for non-residents and will be able to help you:
- Establish your current UK residency status, including recommendations on how you could reduce your tax burden
- Understand and apply any relevant double tax treaties
- Identify opportunities to make your income and gains more tax efficient
What Is the Capital Gains Tax Rate?
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A capital gain is when you sell an investment or an asset for a profit. When you realize a capital gain, the proceeds are considered taxable income.
The amount you owe in capital gains taxes depends in part on how long you owned the asset: Long-term capital gains are from an asset you’ve held for more than one year, and short-term capital gains apply to profits from selling an asset you’ve held for less than a year.
Long-Term Capital Gains Tax
Long-term capital gains are taxed at lower rates than ordinary income, and how much you owe depends on your annual taxable income. You’ll owe either 0%, 15% or 20% on gains from the sale of most assets or investments held for more than one year, depending on your annual taxable income (for more on how to calculate your long-term capital gains tax, see below).
When calculating the holding period—or the amount of time you held the asset before you sold it—you should count the day you sold the asset but not the day you bought it. For example: If you bought an asset on February 1, 2019, your holding period started on February 2, 2019, and you would’ve hit the one-year mark of ownership on February 1, 2020.
Short-Term Capital Gains Tax
If you’ve held an asset or investment for one year or less before you sell it for a gain, that’s considered a short-term capital gain. In the U.S., short-term capital gains are taxed as ordinary income. That means you could pay up to 37% income tax, depending on your federal income tax bracket.
What Is a Capital Gain?
A capital gain happens when you sell or exchange a capital asset for a higher price than its basis.
The “basis” is what you paid for the asset, plus commissions and the cost of improvements, minus depreciation.
There is no capital gain until you sell an asset, but once you’ve sold an asset for a gain, you’re required to claim it on your income taxes. Capital gains are not adjusted for inflation.
Here’s how capital gains are calculated:
- Find your basis. Typically, this is what you paid for the asset, including commissions or fees.
- Find your realized amount. This will be what you sold the asset for, less any commissions or fees you paid.
- Subtract the basis from the realized amount. If your sale price was higher than your basis price, it’s a capital gain. If your sale price was less than your basis price, it’s considered a capital loss.
What Are Capital Losses?
Capital losses are when you sell an asset or an investment for less than you paid for it. Capital losses from investments can be used to offset your capital gains on your taxes.
If you sell an RV or your grandmother’s silver tableware for a loss, you can’t use the loss to offset capital gains.
gains, capital losses come in short-term and long-term varieties and must first be used to offset capital gains of the same type.
For instance, if you have long-term capital losses, they must first be used to offset any long-term capital gains. Any excess losses after that can be used to offset short-term capital gains. You also may use capital losses to offset up to $3,000 of other income, such as earnings or dividend income. Unused capital losses can be carried forward to future tax years.
How Are Capital Gains Taxes Calculated?
You can calculate capital gains taxes using IRS forms. To calculate and report sales that resulted in capital gains or losses, start with IRS Form 8949. Record each sale, and calculate your hold time, basis, and gain or loss. Next, figure your net capital gains using Schedule D of IRS Form 1040. Then copy the results to your tax return on Form 1040 to figure your overall tax rate.
Exceptions to Capital Gains Taxes
For some kinds of capital gains, different rules apply. These include capital gains from the sale of collectibles ( art, antiques and precious metals) and owner-occupied real estate.
Capital Gains Taxes on Owner-Occupied Real Estate
If you sell your home for a profit, that’s considered a capital gain. But you may be able to exclude up to $250,000 of that gain from your income, or up to $500,000 if you and your spouse file a joint tax return.
To qualify, you must pass both the ownership test and the use test. This means you must have owned and used the real estate as your main home for a total period of at least two years the five years before the sale date.
The two-year periods for owning the home and using the home don’t have to be the same two-year periods.
Typically, you can’t take this exclusion if you’ve taken it for another home sale in the two years before the sale of this home.
Capital Gains Taxes on Collectibles
If you realize long-term capital gains from the sale of collectibles, such as precious metals, coins or art, they are taxed at a maximum rate of 28%. Remember, short-term capital gains from collectible assets are still taxed as ordinary income. The IRS classifies collectible assets as:
- Works of art, rugs and antiques
- Musical instruments and historical objects
- Stamps and coins
- Alcoholic beverages (think valuable old wine)
- Any metal or gem
The latter point is worth reiterating: The IRS considers precious metals to be collectibles. That means long-term capital gains from the sale of shares in any pass-through investing vehicle that invests in precious metals (such as an exchange traded fund or mutual fund) are generally taxed at the 28% rate.
What Is the Net Investment Income Tax?
For people earning income from investments above certain annual thresholds, the net investment income tax comes into play. Net investment income includes capital gains from the sale of investments that haven’t been offset by capital losses—as well as income from dividends and interest, among other sources. The net investment income tax an additional 3.8% surtax.
Who Owes the Net Investment Income Tax?
Individuals, estates and trusts with income above specified levels own this tax on their net investment income. If you have net investment income from capital gains and other investment sources, and a modified adjusted gross income above the levels listed below, you will owe the tax.
Capital Gains Tax
Capital Gains Tax (CGT) is a tax charged on the capital gain (profit) madeon the disposal of any asset. It is paid by the person making the disposal. Thegain/profit (the difference between the price you paid for the asset and theprice you sold it for) is considered taxable income.
What is an asset?
An asset is not just something you own outright, it may be an intangibleasset. For example, goodwill in a company or an option over assets areconsidered assets. It can also be something you have an interest in, forexample, a leasehold interest in land.
How are assets disposed of?
Disposing of an asset doesn't just refer to the sale of an asset for money.It includes any transfer of ownership by way of exchange, gift or settlement ontrustees. Transfers of assets between spouses and civil partners are exemptfrom Capital Gains Tax.
Transfers of assets between spouses and civil partnerswho are separated are exempt from Capital Gains Tax if they are made under aSeparation Agreement or a court order. Read here for moreinformation about tax and separation or divorce.
The transfer of a sitefrom parent to child for the purposes of constructing the child's principalprivate residence, where the site's market value does not exceed €500,000, isalso exempt from Capital Gains Tax.
There is no Capital Gains Tax on assets passed on death. When the person whoacquired the assets comes to dispose of them they are treated as if they hadbeen acquired at their market value on the date of the death.
If the assets aredisposed of by the personal representatives of the person who has died, theyare responsible for any gains between the date of the person’s death and thedate the assets are disposed. The annual exemption from CGT of €1,270 (seebelow) does not apply to personal representatives.
The exemption only appliesto people disposing of assets in their own right.
Capital gains exempt from Capital Gains Tax
Gains or profit on the disposal of some assets are specifically exemptedfrom Capital Gains Tax, these include:
- Gains on the disposal of property owned by you (house or apartment) which was occupied by you or by a dependent relative as a sole or main residence. Restrictions may apply where the property was not fully occupied as a main residence throughout the period of ownership or where the sale price reflects development value.
- Gains from betting, lotteries, sweepstakes, bonuses payable under the National Instalments Savings Scheme and Prize Bond winnings.
- Gains on Government Loans and Debenture issued by certain Semi-state bodies.
- Gains on disposal of wasting chattels, that is movable goods, for example, animals and private motor cars.
- Gains on life assurance policies (unless purchased from another person or taken out with certain foreign insurers on or after 20 May 1993).
- Gains made by individuals on tangible moveable property worth €2,540 or less at the time of disposal.
- Gains made on the disposal of property acquired between 7 December 2011 and 31 December 2014 can get relief from CGT in certain cases. However, this relief does not apply if the property was acquired by gift or inheritance. The relief applies to all property, whether residential or non-residential. To get this relief the property must be held for more than 7 years. If it is sold more than 7 years after acquisition and a gain is made on the sale, relief will be given for the initial 7-year holding period. For example, if the property was bought in January 2012 and sold in January 2022, the property would have been held for 10 years, so 7/10 of any gain will be relieved from CGT and 3/10 is taxable.
- Gains made on the disposal of property acquired between 7 December 2011 and 31 December 2014 and held for more than 4 years but less than 7 years are exempt from CGT. However, this relief does not apply if the property was acquired by gift or inheritance. To qualify for this exemption, disposal of the property must take place on or after 1 January 2018. For example, any gain from a property bought on 1 June 2012 and sold on 1 July 2018 is exempt from CGT.
The standard rate of Capital Gains Tax is 33% for disposalsmade on or after 5 December 2012.
|Disposals from:||Rate of CGT was:|
|7 December 2011 to 5 December 2012||30%|
|8 April 2009 to 6 December 2011||25%|
|15 October 2008 to 7 April 2009||22%|
|On or before 14 October 2008||20%|
A rate of 40% however, can apply to the disposal of certain foreign lifeassurance policies and units in offshore funds. Revenue provide a computation sheet fornon-complex situations, to help you find out how much Capital Gains Tax you mayhave to pay (pdf).
For certain windfall gains the windfallgains rate of tax (pdf) is 80%.
Capital Gains Tax can be more complex than the examples above. For thisreason, you should get advice from Revenue (see 'Further information' below).Revenue also publishes a Guideto Capital Gains Tax (pdf).
The first €1,270 of taxable gains in a tax year are exempt from CGT. Ifyou are married or in a civil partnership, this exemption is available to eachspouse or civil partner but is not transferable.
Payment of CGT
For 2009 and subsequent years the tax year is divided intoa revised set of two periods:
- An 'initial period' from 1 January to 30 November
- A 'later period' from 1 December to 31 December.
For disposals in the initial period CGT payments are due by 15 December inthe same tax year. CGT for disposals in the later period are due by 31 Januaryin the following tax year.
For example, if you dispose of an asset in the period January to November2018 you must pay the Capital Gains Tax due to Revenue before mid December2018. If you dispose of an asset in December 2018, the Capital Gains Tax willbe due on 31 January 2019.
For 2003 to 2008 the tax year was divided into twoperiods:
- An 'initial period' from 1 January to 30 September
- A 'later period' from 1 October to 31 December.
For disposals in the initial period CGT payments were due by 31 October inthe same tax year. CGT for disposals in the later period were due by 31 Januaryin the following tax year.
For example, if you disposed of an asset between 1 January and 30 September2008 you must pay the Capital Gains Tax due to Revenue on or before 31 October2008. If you disposed of an asset in the later period, that is, between 1October 2008 and 31 of December 2008 you must pay the Capital Gains Tax due onor before 31 January 2009.
Payment of Capital Gains Tax
Send a cheque for amount of CGT due with a CGT payslip to the CollectorGeneral's office in Limerick.
There are two different disposal periods for CGT, this will determine thedate payment is due and also which CGT payslip is required. Payslip A is fordisposals in the ‘initial period’ and payslip B is for the ‘laterperiod’. Contact Revenue for CGT forms.