Expats Pay A High Price Despite Cut In CGT Rates

Capital gains tax rules changed again in Budget 2016 – but where does this leave expats?

CGT was once a straight forward tax – if you were an expat, then you ignored the rules because they did not apply.

Then, Chancellor George Osborne wrote in a special measure that said if you were an expat or non-resident selling residential property in the UK, CGT was due on any gain in value from April 6, 2015.

To keep the tax in proportion for expats, the values of homes in the UK were rebased on that date, which means any purchase or improvement costs up to then are lost.

The acquisition cost for non-residents becomes the market value on April 5, 2015.

No CGT rate relief for expats

The good news is that on an average priced £300,000 with two joint owners, no CGT is likely to be paid on disposals before April 2017.

This is because house prices are rising at less than 5% a year and each owner has an annual personal allowance of £11,100 on which they do not have to pay CGT.

In Budget 2016, Osborne toned the CGT rates down for investors – from a top rate of 28% to 20% and a basic rate of 18% down to 10%.

Unfortunately, these rates do not apply to expats and non-residents selling homes in the UK, which still have to pay at the old rates of 28% and 18%.

No gain or loss transfers update

The 28% rate applies when UK earnings and gains are £45,000 or more from April 6, 2016.

For property disposals between April 6, 2015 and April 5, 2016, the CGT rates are the same, but the top rate applies to earnings and gains totalling more than £42,385.

These rates and income thresholds apply to individuals. Companies do not pay CGT, but corporation tax on gains, which is currently 20% and set to drop to 17% by 2019-20.

One small cheer for expats no gain-no loss disposals of UK homes is that HM Revenue and Customs has announced a special measure that gives expats more time to report a property disposal where no tax is due.

The measure means expats will not have to report no gain-no loss transfers or a grant of a lease for no premium to certain people.

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