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Property tax changes for non-UK residents

If you own property in the UK but are not UK-resident for tax purposes, you might already have seen the effects of recent changes to tax rules around letting and selling property.

Those rules are still evolving, as the Government seeks to bring the system in line with the way residents pay tax on their property investments.

With further changes planned for next year, here’s what you need to know

Capital gains tax

 People who are not UK-resident usually don’t have any capital gains tax to pay on assets sold in the UK.

 However, new rules that took effect in 2015 mean non-resident individuals who dispose of UK residential property are subject to non-resident capital gains tax, at a rate of 28%.

In April 2019, this tax was extended to commercial property, which is charged at 20%, as well as what HMRC calls ‘indirect disposals’ of UK property or land.

 This is where a non-resident sells shares in a company that derives 75% or more of its gross asset value from UK land, and where the person making the disposal has an investment of at least 25% in that company.

 Capital gains tax is only charged on the gain in value since 6 April 2015, so you’ll need to calculate the difference in the property’s value since that date.

 If you sell a property, it must be reported and the tax must be paid within 30 days of the sale’s completion, through a non-resident capital gains tax return. 

Corporation tax

 Currently, non-resident property companies pay income tax on their UK income. From 6 April 2020, they will be charged corporation tax instead.

 According to the Government’s impact assessment, the change is expected to affect around 22,000 non-resident property company landlords, who will need to complete and file a corporation tax return instead of reporting through self-assessment.

 As the measure takes effect for the 2020/21 tax year, those companies will still need to complete a self-assessment form for 2019/20.

 While there may be costs involved in adjusting to the new system, this should mean a reduction to the tax you owe – especially with corporation tax set to decrease to 17% from 1 April 2020

 Stamp duty

 In early 2019, the Government held a consultation on introducing a 1% stamp duty land tax surcharge for non-UK residents, which was intended to prevent rising house prices in England and Northern Ireland.

 However, no start date has been announced for this yet and the measure was excluded from Finance Bill 2019/20.

Talk to us

 Tax on property is complex, especially for people who are not resident in the UK, and it’s essential that you understand your tax position before buying or selling a house.

 If you’re not sure how these changes could affect you, or if you want to know more about property tax rules, get in touch.