If you are a British citizen and you plan on selling your property to move abroad you will not have to pay any capital gains tax if you are able to satisfy the following criteria:
- The property in question was used primarily as your main home and not as a way of securing any profits.
- This property was your main home for the time you owned it (excluding the past three years).
- It was used by you and your family and no more than one lodger throughout the period of ownership.
- The total area of land that comes with the house does not exceed a total of 5,000 square metres (this is about the size of a standard football pitch) and includes the part of land on which the house is actually built.
- If you are married or in a civil partnership and not separated you are only entitled to have one residence between the two of you.
If you are able to satisfy all of these criteria, you will not be eligible to pay capital gains tax on any property sale. However, you must make sure that you complete the relevant sale within three years of vacating the property. Furthermore, you are not required to prove yourself as a non-resident to qualify for this exemption in liability.
Capital Gains Tax
If you are unable to prove that the property that you are selling was not your main home, it is likely that you will be eligible to pay capital gains tax on such a transaction. If this is the case, you will have a tax free allowance, which for the tax year 2011-2012 is £10,100. A trust limit of £5,050 is also set.
After the exemption, any capital gains made after 23rd June 2010 are subject to an 18% basic rate where total taxable gains and income are less than the upper income tax basic rate. Any gains and income above this amount will be subject to a 28% tax rate. Any capital gains made between the 7th April 2008 and the 22nd June 2010 will be subject to a flat 18% rate.
When undertaking any transactions that involve a capital gain the HMRC strongly recommends that you keep all of the relevant documentation that accompanies the sale. For example; the contracts for the sale itself.
You must also be mindful of the tax implications that you may incur for selling such a property whilst living in your new host country. Double taxation treaties may be applicable, so ensure that you check this meticulously for any such liabilities.
Tax Implications On Property Rental Income
If you are classified as a non-resident and are receiving a rental income from a UK property, you will be obliged to deduct the basic rate of income tax at 20%. Should you use a letting agent to manage your property for you, they will take care of this for you and will deduct the 20% from the ‘net rent‘, after allowances have been taken into account. Otherwise, your tenant will have to deduct the relevant 20% themselves.
There are certain circumstances where you may be entitled to claim tax relief on this income and you would need to contact your local HMRC tax office to find out about this further.