Category Archives: Capital Gains Tax

UK residents are generally liable to Capital Gains Tax (CGT) when they dispose of overseas property at a gain. A disposal includes selling, gifting, or otherwise transferring ownership of a property located outside the UK.

CGT is chargeable on the profit made on the disposal at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. You can usually reduce your gain by deducting allowable costs, such as legal fees, estate agent fees and the cost of capital improvements (but not routine maintenance).

If you are a UK resident but your permanent home (“domicile”) is abroad, special rules may apply which can affect how gains are taxed and reported.

You may also be liable to tax in the country where the property is located. Where the same gain is taxed in both jurisdictions, double taxation relief may be available depending on the terms of the relevant tax treaty between the UK and that country.

Non-residents may still be within the scope of UK CGT on overseas property in certain circumstances, including where they return to the UK within five years of leaving.

Given the complexities between UK rules, overseas tax systems and residency status, it is important to consider your tax obligations in both jurisdictions when disposing of overseas property.

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company, or an individual’s interest in a trading partnership. When this relief is available, a reduced 18% rate (2026-27) of Capital Gains Tax (CGT) applies. 

To qualify for BADR, certain conditions must be met:

Sale of a Business or Business Closure:

• You must be a sole trader or business partner; and
• You must have owned the business for at least 2 years leading up to the sale or closure.
• You must dispose of your business assets within 3 years to qualify.

Sale of Shares or Securities:

Both of the following must apply for at least 2 years up to the date you sell your shares:

• You must be an employee or office holder of the company (or a company within the same group).
• The company’s main activities must involve trading, not non-trading activities like investment, or it must be the holding company of a trading group.

Additional rules can apply if the shares are from an Enterprise Management Incentive (EMI).

Currently, you can claim a total of £1 million in BADR over your lifetime, allowing you to qualify for the relief multiple times. The lifetime limit may be higher if you sold assets before 11 March 2020. Investors' Relief CGT rates mirror those for BADR and have also been set at 18% since 6 April 2026.

Many homeowners assume that if a property has been their main residence at some point, any gain made on sale will automatically be free from Capital Gains Tax (CGT). Whilst in many cases, this is correct there are exceptions. For example, periods spent living away from your home can sometimes reduce the amount of Private Residence Relief available.

The good news is that some periods always qualify for relief. In most cases, the final 9 months of ownership are automatically exempt, provided the property was your only or main residence at some stage. There can also be relief for up to the first two years of ownership where a property was being built, renovated or where you were unable to move in immediately.

Additional relief may also be available where you temporarily lived elsewhere. Absences of up to three years for any reason can qualify, while periods of up to four years may qualify where you had to work elsewhere in the UK. Time spent working overseas can also qualify for relief in full. Normally, you must have lived in the property before and after the absence unless your work prevented your return.

Where more than one property is owned, the rules become more complicated as generally only one property can qualify as your main residence at any one time. Married couples and civil partners are also normally restricted to one main residence between them.

These rules can have a significant impact on the amount of CGT payable when a property is sold, particularly where second homes or lengthy absences are involved.

How capital gains are linked with Income Tax is important to understand as your overall income position affects the Capital Gains Tax (CGT) rate you pay.

CGT interacts directly with your Income Tax band. Your taxable income is first calculated after deducting your Personal Allowance and any Income Tax reliefs. Your chargeable capital gains are then added on top, after subtracting the annual tax-free CGT allowance (2026-27: £3,000). This determines whether your gains fall within the basic or higher rate Income Tax band, which determines the CGT rate that applies.

For individuals in the higher or additional rate Income Tax band, capital gains are usually taxed at 24% from 6 April 2026. Basic rate taxpayers will initially pay CGT at a rate of 18% but this increases to 24% for any amount of chargeable gain above the basic Income Tax band.

Gains on certain assets are treated differently. Gains on business assets may qualify for Business Asset Disposal Relief at a rate of 18% and most people do not pay CGT when selling their main home. Trustees and personal representatives typically pay a flat 24% CGT rate.

Transfers of assets between spouses or civil partners are usually free from Capital Gains Tax (CGT). When you give or sell an asset to your spouse or civil partner, it is treated as a disposal for CGT purposes, but on a ‘no gain, no loss’ basis.

This means no immediate tax is due, and the receiving spouse effectively takes over the original cost and ownership history of the asset. When the asset is ultimately sold, any gain is calculated based on the difference between the original purchase cost and the eventual sale proceeds, not the value at the date of transfer. Records of the original cost should therefore be retained.

There are some important exceptions. The no gain/no loss treatment does not apply if you were separated and did not live together at any point during the tax year of the transfer. It also does not apply where assets are transferred as trading stock for the recipient’s business to sell on. In these cases, the transfer is treated as taking place at market value, and a CGT liability may arise for the person making the transfer.

Similar rules apply to gifts to charity. Generally, no CGT is due on outright gifts. However, if an asset is sold to a charity for more than its original cost but less than market value, a gain may arise based on the actual sale proceeds.