Spain Explained

Proposals for capital gains tax in the UK

It might come as a surprise to know that in the UK, until now, capital gains tax (CGT) wasn’t payable by non-residents when selling property there. This is perhaps one reason why house prices in London have risen to such exorbitant levels. They have become a guaranteed source of investment, with prices rising annually and no CGT to pay when you come to sell.

Concerned about the impact this is having on the capital, the  application of CGT to non-residents is currently being consulted on in Britain. It is being proposed, and will most likely be adopted, that from the 6th April 2015, capital gains tax will apply to foreigners selling UK property.

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It is unclear at this point how much the actual rate might be. A consultation was opened in March 2014 that proposes that the CGT is the same as for UK taxpayers with a 28% rate for higher-rate taxpayers and 18% if they are lower-rate taxpayers.

The annual exempt amount being proposed is £10,900.  The proposal includes a form of withholding tax that operates alongside an option of self-reporting the tax due. The Finance Act 2015 will see the introduction of the changes.

No mention has been made at this point of it applying to expats. However, as non-residents owning property in the UK there is the possibility that they might be classed as ‘foreigners’ too when it comes to selling property there.

Hopefully, if this does turn out to be the case, the double taxation agreements that Spain has with the UK, will apply to capital gains tax too.

Considerations

If this change does apply to CGT, those contemplating retiring to Spain might review their options when moving. Recently, more people have been renting in Spain whilst deciding where it might be best to live when moving abroad.  The property slump, difficulty selling in the UK and greater anxiety about moving lock, stock and barrel, have encouraged people to rent rather than sell.

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Renting in Spain might no longer be quite so attractive if, once having moved abroad, residents in Spain become eligible for CGT back home. Others might re-consider the balance of their residency, choosing to spend more time in the UK and retaining residency there.

It will certainly give those contemplating a move something else to think about when planning their future.

More information

‘Implementing a capital gains tax charge on non-residents: consultation’

To help navigate the bureaucracy of the Spanish tax system, our dedicated advisers are on hand to help at every step of the way. Fill out this short form and we will offer you a free consultation without obligation.

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2 comments

Ian smith

4 February, 2020 9:45 pm

I am a resident in spain if I sell my house in uk for say £150000 and buy a.house in spain for 110000 euros plus tax on the purchase will I pay capital gains tax on the sale price or the difference between sale price and purchase price

Oscar Paoli

5 February, 2020 6:07 pm

Hi Ian,
The possible capital gains tax that you will have to pay will depend on the purchase and sale price of the house in the UK, the re-investment in habitual housing is technically not recognized here. It could be argued with the authorities but we only know of one case where it was favorable for the client. Unfortunately the calculation as mentioned is not based on the sale price in the UK and purchase price here.
Whether or not they have to pay in Spain depends first on whether or not there is a profit and if you take residence here during the year of the sale. In the event that the answer to both is yes, you will have to pay the capital gains tax between the initial purchase price and sale of the house in Uk.
With kind regards,
Ábaco Advisers