How will the Capital Gains Tax

How will the Capital Gains Tax impact the UK for non-residents?

On 6 April 2015, Capital Gains Tax (CGT) was imposed on disposals of residential UK property by non-resident individuals, trustees, estates and close companies. As many people in the South Africa own property in the UK, we felt that this was the right time to discuss the implications of CGT and what actions to take

How will the Capital Gains Tax

The tax rate for non-resident individuals will be the same as the rates applicable to UK resident individuals. Non-resident individuals who have no other UK property, any capital gains under approximately £32,000 will be liable for an 18% CGT charge; any additional gain will attract a charge at 28%.

For non-residents who own companies in the UK, which dispose of residential UK property, the tax rate will be the same as UK corporation tax. Currently, it’s set at 20% although companies such as these will benefit from the associated allowances that come with the corporation tax.

Whilst there is no absolutely prescribed way provided by the government yet – Exceed UK would recommend our non-resident landlord clients to obtain a valuation of their UK properties from 5 April 2015 and keep a record of this regardless of future intentions. If clients don’t want to incur the cost of a formal valuation, then we advise a search of the web for similar properties in your area and save this in a Word document. This will then provide the UK government with a trusted figure to use as your ‘base’ amount as of April 2015.

Any increase in value that you achieve, would then be taxed at the rates of 18% or 28% depending on how much profit you have made.  Any gain must be reported.

Non-residents may also wish to register with HMRC in order to defer payment of the tax due on disposal until the self-assessment return date (which could be up to 18 months later). As a Non Resident Landlord (NRLS) with HMRC ensures you only pay tax on the profits of the property annually.

The question of how all this will affect the housing market is an interesting one. Clearly, the most obvious answer is negatively but with the UK being seen as a safe haven for international investors and if there is a shortage of housing stock with an overwhelming demand, then we may continue to see rising prices, particularly in the South East led by Greater London.

Specific advice should be obtained before taking action, or refraining from taking action. On the basis of this information, which remains subject to further consultation, please call Exceed UK on +44(0)1784 439955.

Exceed UK specialises in services to individuals and the small medium enterprise (SME’s) businesses, offering start-up facilities, accounting, consulting services, contractor solutions, CFO services, company secretarial, taxation and human resource systems, management accounting and other fiduciary services.