UK Capital Gains Tax for Expats and Non-Residents

The United Kingdom stands on the cusp of introducing sweeping changes to how wealthy residents are taxed there. 

Those are on top of changes that have already been implemented – a rise in Capital Gains Tax (CGT) is among them.

The changes have already prompted a flight among the very wealthy, but many high-net-worth individuals (HWNIs) remain with a plan for dealing with the British government’s plan to target their wealth.

Do you have any idea how the proposed changes will affect you and your assets?

They’ll almost certainly be life-changing for some individuals, so it’s critical to educate yourself on what these changes will mean for you personally.

The increase in capital gains tax is a key change that has already been implemented. 

Capital gains tax rates for most assets recently rose to 18% at the lower rate and 24% for higher earners. This increase made the rates equal to those charged on residential property sales.

This measure, and others aimed at increasing the tax burden on the wealthy, has led to a notable exodus of millionaires from the UK.

Whether you’re planning to leave the UK or not, if you have assets subject to capital gains tax there, it’s time to consider your options.

UK Capital Gains Tax and When You Pay It

UK capital gains tax is paid on the gain when you dispose of chargeable assets. They include:

• Property that’s not your primary residence
• Your primary residence, if rented out or used for business 
• Any shares (excluding those held in an ISA or PEP)
• Assets held by a business
• If you sell or gift crypto assets (reliefs are available)
• An inheritance that you later dispose of
• Personal belongings worth over £6,000.

Capital gains tax (CGT) is only due on your gains above a tax-free allowance of £3,000, or £1,500 for trusts, each year. This benefit is called the annual exempt allowance.

Generally, there is no CGT to pay for gifts to your spouse, civil partner or charity. And neither do you pay CGT for certain other assets, like PEPs, ISAs or wins from gambling.  

If you live overseas, gains you receive from selling property or land must be paid, even as a UK non-resident. 

You may have to pay capital gains tax even if your asset is overseas.

There are special rules if you’re a UK resident, but your permanent home is not in the UK. In this case, you don’t pay capital gains tax on some UK assets, such as shares in UK companies. 

That’s unless you return to the UK within five years or if the shares are deemed an indirect disposal of assets in a company where land is 75% or more of its gross asset value. 

Benefits of Leaving the UK

With tax changes looming, living costs rising and crime rates soaring, it’s little surprise that so many people are deciding to leave the UK.

But what awaits you if you choose to move to another country? 

Some of the benefits include:

• The opportunity to lower your taxes in a tax-friendly country
• Better weather, health benefits and a lower cost of living
• Improved opportunities for investment, buying real estate and starting a business.

Capital Gains Tax for UK Expats and Non-Residents 

Capital gains tax is typically based on the sale price, less the purchase price, to give you the gain. You’re then taxed on the net gain after your annual exempt allowance.  

Let’s imagine you buy a house in the UK, then leave the country and want to sell the property – this is where non-resident capital gains tax comes into play. 

What makes you eligible for non-resident capital gains tax?

There are two scenarios that could make you eligible for non-resident capital gains tax in the UK.

• Firstly, you may never have lived in the UK, but you own rental property and decide to sell it. 
• You could also have been a resident of the UK, but at the time you sold your property, you were no longer a resident there.

How is non-residential capital gains tax calculated in the UK?

Suppose your property was purchased for £250,000 and then sold for £300,000.

That will result in a gain of £50,000, which will be subject to capital gains tax in the UK. The rate will be either 18% or 24%, depending on your total annual income. 

Since non-residents can also benefit from the annual exempt amount, they’d only be taxed on £47,000 of this gain in the 2024/25 year. 

If you were a non-resident when you sold it, you now have a choice on how you report this on your tax return.

Your three options are: 

• Rebasing method 
• Time apportionment method
• Paying based on your entire profit.

The first two options often allow you to reduce the amount of tax you’ll pay on the gains if you have owned a property since before 5 April 2015.  

With the rebasing method, you use the estimated value on 5 April 2015 when calculating your gains, instead of your purchase price. You can also make use of tax-deductible expenses related to buying, owning and improving the property.

Alternatively, with the time apportionment method, you calculate your gain based on your total profit, then give yourself a discount based on the percentage of ownership that occurred before 5 April 2015.

So, let’s imagine you bought a house for £300,000 on 5 April 2010 and sold it for £353,000 on 5 April 2025. That means there’s £50,000 of taxable gain after the annual exempt allowance of £3,000 is used.

Some 33% of the ownership was before 5 April 2015. On 5 April 2015, its value was £315,000. 

Based on the lower rate of tax (18%), your CGT bill in this scenario would be:

• Via the rebasing method, £6,300 (18% of £35,000)
• Via the time apportionment method, £5,940 (18% of £50,000 with a 33% discount for ownership before 5 April 2015)
• Via paying based on your entire profit, £9,000 (18% x £50,000). 

As a non-resident or anyone now selling a property in the UK, you must go to the His Majesty HM Revenue & Customs (HMRC) website and report your disposal within 60 days of its completion.

How to Avoid Capital Gains Tax in the UK

Perhaps you’re wondering what happens if you leave the UK halfway through the tax year and then go on to sell your assets.

Though there has been talk of imposing one, the UK currently does not have an exit tax.

That means you could potentially amass assets as a UK resident, leave and avoid paying tax on the gains.  

That’s because you’re not taxable on capital gains when you’re non-resident. And CGT only applies after you sell, not when you buy.

The exception is if you have UK property, which is still treated as UK taxable income when you leave.

The 5-year Rule for Capital Gains Tax in the UK

The temporary non-residence rules, or the 5-year rule as it’s known, apply to UK taxpayers. 

It’s an anti-avoidance measure that HMRC implemented to stop people from going overseas for one tax year, crystallising their gains, then returning to the UK without paying tax on them.

For example, someone might move to Dubai for a tax year, withdraw all of the capital from their UK company, and then return to the UK in the hope of securing a massive tax advantage. 

Under the 5-year rule, if you decide to withdraw retained earnings from a company while living abroad and return to the UK within five years, you are fully taxed the year you return.  

So, before you take any money out, you need to ensure you will be a non-resident for the next five years.

If not, be prepared to be taxed on your withdrawals.  

There are certain caveats to this.  

If you pay yourself a salary from your business (but no dividends), that’s not included in this anti-avoidance legislation, so you can continue doing so as you wish. 

There’s also the pre-departure profits issue, where the foreign-sourced income you earn before departing the UK may still be taxable, whereas it’s likely to be tax-free after your departure. 

So, separating your pre-departure profits from your post-departure profits is essential. 

Remember the five-year rule. To protect your post-departure profits, you must ensure that you don’t become a UK resident for at least five years. 

Otherwise, that entire gain will be taxed when you return to the UK.

UK Capital Gains Tax for Expats: FAQs

Planning to Leave the UK? 

If you’re a high-net-worth individual planning to leave the UK, you’re not alone. 

At Nomad Capitalist, we have nothing against the UK. It remains an important country with plenty to offer those who enjoy its culture, traditions and way of life. 

However, it’s suffering from a gradual but constant decline in relevance for successful investors and entrepreneurs. Many of what we call ‘legacy brand’ countries are suffering from this fate.

Like the US, Canada and Australia, the UK is moving in the wrong direction. Increasing taxes, government overreach, rising crime and falling living standards diminish the UK’s appeal to the wealthy. 

But here’s the thing – you have choices. 

Plenty of tax-friendly countries offer the conditions to build your dream business and lifestyle. There are many where you will pay absolutely no capital gains or wealth taxes. 

Our key piece of advice – if you plan to leave the UK, you must plan your exit properly. 

Whether you’re seeking a second residence or citizenship to use now or a Plan B escape for the future, it can be complicated to do things by the book. 

That’s where Nomad Capitalist comes in.

We’ve helped 2,000+ seven- and eight-figure individuals to create their dream personal and professional lives offshore. 

Our clients are paired with experts in tax, investment strategy, asset protection and immigration to create your ideal solution.  Learn more about our holistic Nomad Capitalist plans here.