A new tax year in the UK often brings with it new regulations of which investors must be aware, and the 2015-2016 tax year – which began on 6 April – is no exception. One of the most significant changes which will affect non-domiciled UK residents (“non-doms”) who are looking to sell residential property is that they will for the first time be charged Capital Gains. It is possible that in the future the upper limit will be raised.
Capital Gains Tax is a tax on the profit someone makes when they sell an asset – in this case, a property – which has increased in value. It is important to note that it is the gain which is taxed, not the total amount of money received. So if a non-dom bought a property for £1m and now sells it for £1.5m, they will be liable for tax on the £500,000 profit.
The seller does not pay Capital Gains Tax if the property they sell is their main home; but the very fact that non-doms live abroad means that in virtually every case property sold in the relevant price bracket will be liable to the tax.
The tax has been introduced in an attempt to slow down the rising rate of house prices, especially in London and the South East of England. In London, even small, two- or three-bedroomed houses from the late Victorian era, which were built as workers’ dwellings and were selling for £250,000 ten years ago, have now risen into the £500,000 plus bracket.
This is making it very difficult for young, first-time buyers to purchase houses. It has long been the wish of the Conservative Party, the leading party in the current coalition government, that as many UK residents as possible own their own homes, and the introduction of Capital Gains Tax for non-doms is just one way they hope to slow down the rate of increase in house prices in the most populous part of the UK.
And even though there is a General Election coming up in the UK on 7 May, even if there is a change of government the new regulation will not be altered.
The actual amount of Capital Gains Tax for which any individual will be liable will depend on a number of factors, and thus it is highly recommended that any non-dom considering selling a residential property in the UK seek sound financial guidance first. Oracle Capital Group will, of course, be well placed to offer such advice to clients.
Should you wish to receive recommendations, ask questions or get in touch with our experts, please email us info@orcap.co.uk or call +44 (0) 207 725 6900
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