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UK capital gains tax changes to impact expat property owners?

The Autumn Statement delivered by UK Chancellor George Osborne contained a least one piece of potentially bad news for expatriates with property in the UK – in the future, they might have to pay UK capital gains tax on any property profits, even though they are not resident for tax on UK income.

Whilst the details have yet to be agreed and implemented, it seems sure Osborne wants to target those selling UK property for profit while they are resident overseas. The rule change, which is to come into effect in April 2015, could result in a capital gains charge of up to 28 per cent.

International mortgage brokers are urging expatriates not to rush into any hasty decision yet though. Commenting on the proposed changes, managing director Tim Harvey said, “There is still no real data on the scheme at present, so those selling now for example are unlikely to be taxed. However, the vast majority of expatiates with international mortgages tend to own just the one house which is rented out. Provided they can show this is the main family home, there is a good chance the tax will not apply.”

As ever, record keeping for expatriates will be critical – capital gains charges can be reduced by taking into account repair and maintenance costs which are not deductible against income, but only if these are evidenced, so expatriate landlords should get into the habit of keeping detailed records of all monies spent.

According to the UK Land Registry, property prices have risen on average by 3.1% in the UK over the last year, but by nearly 9% in London as a whole, so there are still considerable regional differences in price changes.

It is also not clear yet whether rules allowing a UK resident to designate which is their main principal primary residence could apply to expatriates too – so if an expatriate returned to the UK and lived in a house for a given period, it could then be sold as a main residence, thus avoiding capital gains tax. Other schemes to reduce taxation liabilities include lettings relief, which can further reduce capital gains tax and when combined with the current 2013/14 £10,900 CGT allowance can often take bills down to zero. As ever, issues to do with tax are complex and highly individual, so it remains the case that you should always take detailed professional tax advice as part of your overall planning.

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