Worried about a big capital gains tax bill....help!! Any advice very welcome!

[charlotte_t]

My husband and I have been planning to move to Melbourne with our children. All was going well - job secured, hoping to hear back on visa 189 any day now, schools sorted, but now we have found out about NRCGT! I read other posts that said no one pays it, it’s just an accounting exercise but how true is this?! We did a self-build house and even after accounting for the build costs, the uplift in value has been quite significant. We had planned to rent the house out for a couple of years and then sell if we’re settled in Aus. But now we feel our only options are either to forget moving or sell before we go, which we really don’t want to do. Is there any way of avoiding this potentially massive tax bill?!! Any advice very welcome. We feel like the rug has been pulled from under us and all our plans and hopes may have been for nothing. Thank you 

[Ken]

1 hour ago, charlotte_t said:

My husband and I have been planning to move to Melbourne with our children. All was going well - job secured, hoping to hear back on visa 189 any day now, schools sorted, but now we have found out about NRCGT! I read other posts that said no one pays it, it’s just an accounting exercise but how true is this?! We did a self-build house and even after accounting for the build costs, the uplift in value has been quite significant. We had planned to rent the house out for a couple of years and then sell if we’re settled in Aus. But now we feel our only options are either to forget moving or sell before we go, which we really don’t want to do. Is there any way of avoiding this potentially massive tax bill?!! Any advice very welcome. We feel like the rug has been pulled from under us and all our plans and hopes may have been for nothing. Thank you 

It's only the gain after you become non-resident that is taxed in the UK (and currently the first 18 months of that is tax-free - but that's going to reduce to 9 months). All the gain you've already made is tax free - you might be wise to get a proper valuation done on it so you can demonstrate in which period the gain was made in though as otherwise it could be apportioned across the whole period.

[charlotte_t]

Thanks Ken. I think we have to get a retrospective valuation as at April 2015, rather than a valuation at the date we become non-residents? Is that correct? 

[Marisawright]

4 hours ago, charlotte_t said:

Thanks Ken. I think we have to get a retrospective valuation as at April 2015, rather than a valuation at the date we become non-residents? Is that correct? 

Why do you think that?  You have no tax liability for the time the house was your principal place of residence, so you just need a valuation for the date when it stops being your home.  

It sounds like you're still  living in it, so you haven't incurred any liability yet, therefore you just get a current valuation.  Then in the future, when you decide to sell, you will be liable for tax on the difference between that valuation and what it sells for.

[ramot]

1 hour ago, Marisawright said:

Why do you think that?  You have no tax liability for the time the house was your principal place of residence, so you just need a valuation for the date when it stops being your home.  

It sounds like you're still  living in it, so you haven't incurred any liability yet, therefore you just get a current valuation.  Then in the future, when you decide to sell, you will be liable for tax on the difference between that valuation and what it sells for.

There was a reason for getting a valuation on April 2015, sorry can’t quite remember why, but at that time we certainly got one for our UK properties. At that time we didn’t have PR, will try to check why later. We now have PR so have again had to get a new valuation.

We are just in the process of sorting out our tax liabilities, haven’t had PR long enough apparently to pay anything for last year. I won’t post till I know all the implications that affect us for sure.

[Marisawright]

1 minute ago, ramot said:

There was a reason for getting a valuation on April 2015, sorry can’t quite remember why, but at that time we certainly got one for our UK properties. 

Maybe there was some change in the legislation? The thing is, you were presumably already renting out the property by that time, unlike the OP?

[Alan Collett]

There is a need to consider CGT in the UK and in Australia if you sell a residential property in the UK when non UK resident.

The UK CGT computation as a non resident will have reference to the April 2015 valuation (if the property was owned at that time).

You then time apportion the gain between a period when it was your main residence (CGT exempt) plus the last 18 months (currently - reducing to 9 months if sold after the end of the current UK tax year).

There are also exemptions that will reduce the capital gain that is subject to tax in the UK - the annual exemption, plus Letting Relief (if sold before the end of this UK tax year).

So maybe not as bad as you might have thought, but there may be a CGT risk.

Best regards.

[Alan Collett]

4 hours ago, Marisawright said:

Maybe there was some change in the legislation? The thing is, you were presumably already renting out the property by that time, unlike the OP?

Yes, the UK introduced CGT on the disposal of a residential property in the UK by non residents for disposals on or after 6 April 2015.

Best regards.

[charlotte_t]

3 hours ago, Alan Collett said:

There is a need to consider CGT in the UK and in Australia if you sell a residential property in the UK when non UK resident.

The UK CGT computation as a non resident will have reference to the April 2015 valuation (if the property was owned at that time).

You then time apportion the gain between a period when it was your main residence (CGT exempt) plus the last 18 months (currently - reducing to 9 months if sold after the end of the current UK tax year).

There are also exemptions that will reduce the capital gain that is subject to tax in the UK - the annual exemption, plus Letting Relief (if sold before the end of this UK tax year).

So maybe not as bad as you might have thought, but there may be a CGT risk.

Best regards.

Thanks Alan. That’s really useful and I think I now understand how the UK CGT liability works. Could there be a tax liability to pay to the Australian authorities too? How does this work? Thanks for you help. 

[Alan Collett]

3 minutes ago, charlotte_t said:

Thanks Alan. That’s really useful and I think I now understand how the UK CGT liability works. Could there be a tax liability to pay to the Australian authorities too? How does this work? Thanks for you help. 

Hi Charlotte!

Please feel able to ping a private message to me if you'd like to tee up a freebie conversation on the phone.

Best regards.

[le petit roi]

This topic encouraged me to do a bit of a search and I found this on the HMRC that allows non-residents to calculate their CGT liabilities. Still best to consult a UK tax agent but should give some guidance.

https://www.tax.service.gov.uk/calculate-your-capital-gains/non-resident/

Note: Residents in Scotland have to apply different tax rates.