Selling a property in the UK - where to start with capital gains?

[dunc]

I'm hoping someone can give me some general advice on capital gains in UK/Australia and also maybe recommend a tax agent that deals with both UK and Australia. 

I'm in the process of selling my house in the UK, an offer has been accepted. It was my home when I lived in the UK and it was rented for some short periods as well.

- Bought the house in Jan 2006
- Lived in it until Jan 2014 then moved to Australia temporarily for work on a 457 visa
- Over the next 4 years I rented it out on a couple of short term lets and used it when I was in the UK for holidays/work 
- Rented an apartment in Australia during the time I was there
- Got PR in 2016 (not sure if this is relevant but mentioning just in case)
- Moved back into my house in the UK in Jan 2018
- Moved back to Australia in Feb 2019
- House was empty until May 2019, then used it for a trip to UK
- After that a friend was in it for a while/it was empty over COVID
- Then bought a place in Perth in Jan 2021 (I think it becomes principal residence at this point?)
- House in UK was empty in 2023 and on the market, offer accepted last month

I'm just wondering where I start with any capital gains owed in the UK and what I have to do over here regarding the sale. Do I owe capital gains here as well? I read somewhere that it would be the period of when I owned both properties and not due until I sell the place in Australia. Not sure how accurate that is! 

Any help appreciated.

[Ken]

For UK tax I'd start here:- Work out your tax if you're a non-resident selling UK property or land - GOV.UK (www.gov.uk)

Any gains made before 6th April 2015 are exempt as there was no CGT on residential property for foreign residents before that. If you become a UK resident again before disposal no tax is payable (and if you had a loss you can still utilise that a loss against general income). I can't see any definite ruling on what happens if you then cease to be a UK resident - but logically it should only apply to the period from February 2019 (if that is the date you last ceased to be a UK tax resident).

You can choose for Australian tax to wait until you dispose of your house in Perth to pay any CGT, but if you do that it's going to be very hard to claim an offset for any UK tax paid. I personally would pay the CGT for the period from January 2021 to disposal in my FY2024 tax return. That should be a fairly small portion of the gain and you'll be able to claim the 50% discount and offset 50% of the UK tax paid. If that's still going to leave you with some tax to pay consider (before 30th June) paying some of that gain into your Super and claiming a tax deduction for it. Depending on your exact circumstances that can reduce your tax to 15% on the taxable portion on the gain (which is of course really only 7.5% because of the 50% discount and not even that when you calculate the effect of the UK tax offset).

[dunc]

Thanks for the info Ken, much appreciated.

I used the following calculator - https://www.tax.service.gov.uk/calculate-your-capital-gains/non-resident/

I'll need to wait until after the settlement to put in the contract date but it sounds like there won't be much CGT to pay, not into four figures anyway. It came back with three tax figures at the end and the wording at the top let me know which of the post 2015 values was lower. However, the third "Gain over whole period of ownership method" was a fraction of the amount of the post 2015 values. I'm assuming I can just go with that one!

I hadn't thought about how to claim the offset for the UK tax paid years from now. It sounds like there are some benefits to doing it sooner rather than later - I may have to give you a call come tax time

Edited September 12, 2023 by dunc

[Alan Collett]

For the UK CGT there are 3 ways to calculate the capital gain - you choose the one that provides the best outcome for you.

Rebasing to April 2015 usually provides the best outcome, but not always.

There is a need to submit a special CGT return with HMRC and to pay any CGT owing within 60 days of the sale completing.

In Australia the capital gain is calculated with reference to the value of the property on the date you became a permanent visa holder.

We then apply an A/B fraction to strip out the amount that is CGT exempt.

If I may I won't dive into what periods are in A and what are in B.

Note also that in Australia a former main residence that is income generating can be treated as CGT exempt for up to 6 years - so long as you don't treat another property as being CGT exempt for the same period of time; generally you can only have 1 x CGT exempt main residence.

If you want to explore this more fully and would like a freebie initial chat feel able to complete the enquiry form at bdh Tax (see my signature block below).

Best regards.