Proposals for capital gains tax in the UKTaxes Mon, 15 Sep 2014
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.
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.
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.
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.