Taxation on UK Second property sale in year of migration

[MTut]

Hi,

 

I wondered if any of you had experience of the below.

 

I'm English and planning to move to Oz with my Australian wife in the next year or two.

 

I'm a higher rate tax payer (just, earning circa 50k p/a) and have a rental property - my Dad's old house that I inheirited. Whilst running it while living nearby is fine, I had considered selling it at some point soon and am keen to try and mitigate the the capital gains.

 

So, let's say if I sold it, I would make a capital gain (after annual cgt allowance) of £100,000.

 

As a higher rate tax payer, I'd be liable to 28% CGT.

 

However, if I moved 3/4's of the way through the tax year, then maybe spent a couple of months travelling a bit before working in Oz, I could keep my earnings under £43k for the year and only be taxed at basic rate CGT of 18%, saving me £10,000 in taxes.

 

My concerns would be:

 

1) Would I have to keep my UK AND Oz earnings for the tax year under £43k to benefit from this deduction and be classed as a basic rate tax payer?

2) Would Oz look at my sale as earned overseas income and try and tax me on it?

 

Hope that makes sense, I'm a Financial Adviser in the UK and am going to take my Oz qualifications but not far enough into it to answer my own question!

 

Obviously if I can take some time of and save £10k, I'm all in favour!

[Ken]

Deleted

Edited September 30, 2016 by Ken

[MTut]

1) If you cease to be UK resident you'll only be taxed on your UK income, but if you are still a UK resident you'll be taxed on your worldwide income and so would need to keep the total below the threshold. Unfortunately it's unclear from you've written whether or not HMRC would agree that you've ceased to be UK resident. If you're "travelling a bit" that suggests you're planning to return shortly for example and there's the fact you refer to this as a second home so perhaps you're keeping another home in the UK available? If you intend to remain permanently in Australia that would cease your UK residency as soon as you arrive. Technically it's the intention that matters although from a practical standpoint it's how long you actually stay that matters (if you return within a few months it's very difficult to successfully claim you intended to leave permanently - especially if you've kept a home in the UK).

 

2) Depends partly on what type of visa you have - if you're a temporary resident you may be able to escape any taxes on your foreign income but a permanent resident is always liable for tax on their worldwide income. However you'll only be liable for Australian Tax on the gain from when you became an Australian resident not from when you acquired the property and you can offset the UK tax paid.

 

Thanks Ken. I'd be on a Partner Visa via my Wife, which I think would start as a Temporary, then we'd apply for a Permanent Visa after a couple of years.

 

The move would be with the intention of a long term stay. The 'travelling' part was really just about maybe not working when I get there for a couple of months to go round and see the sights - and therefore keep my income under the HRT threshold.

 

We were planning on keeping our main residence in the UK on as a rental (and a fall back if we decided after a couple of years we preferred the UK.)