If you’re living in the UK and thinking about selling property overseas, the first question is almost always the same: Do I have to pay capital gains tax in the UK on it? The short answer is yes, usually.
HMRC looks at:
- Your residence status
- The type of property
- The gain you’ve made
From there, they work out what portion belongs to the UK. The long answer takes more explaining, because overseas property sales can trigger tax both where the property sits and back home in Britain, which is why people quickly want to know about double taxation agreements and reliefs.
Do You Pay Capital Gains Tax on Overseas Property?
If you’re a UK resident and you sell an overseas asset, HMRC will want to know. That includes everything from second homes in Spain to rental flats in Dubai. The basic principle is straightforward: you’re taxed on your worldwide gains if you live in the UK. Non-residents have different rules, but if you’re reading this with a UK address, then the gains count.
That doesn’t mean you’ll be taxed twice without relief. Double taxation agreements step in to avoid that.
Say you sell in Portugal, where there’s local tax on the gain. If there’s a treaty, the UK recognises that tax and allows credit, so you don’t end up paying both countries in full. HMRC publishes the agreements, and you can check them online before you sell.
What Counts as a Taxable Gain?
To work out a taxable gain, you start with the sale price, deduct the costs (purchase price, improvements, selling fees), and then see what’s left. The gap between those two figures is your gain.
So it’s simple in concept but fiddly when you’re actually doing it because foreign exchange rates matter: HMRC wants figures converted into sterling at the correct rate, not whatever your bank showed on transfer day.
If you’ve owned the property for years, you’ll also want to dig up completion statements and any legal fees to keep your taxable gain as low as possible.
How Do Income Tax Bands Affect Your CGT Rate?
The rate you pay depends on your income tax band. For basic-rate taxpayers, capital gains tax on overseas property is normally 18% for residential property and 10% for most other assets.
If your gain pushes you into higher income brackets, the rate rises to 28% for residential property or 20% for others. That’s why planning the timing of a sale can matter!
If you already had a high-earning year, the property gain may bump your rate up, while selling in a lower income year keeps the percentage down.
What Reliefs are Available on Overseas Property?
One important relief is private residence relief. If the overseas home was genuinely your main residence for part of the time, that period may be exempt from capital gains tax liabilities. The rules are nuanced, especially since 2020 when lettings relief was cut back, but it’s still worth checking.
If you owned both a UK property and an overseas property, you could elect which was your main residence within two years of buying the second. If you never made that election, HMRC will just decide for you based on evidence.
There are also allowances that reduce what you pay. Everyone gets an annual exempt amount (in recent years this has been falling – for 2025 it’s £3,000, and due to drop further). You deduct this allowance from your taxable gain before applying tax rates. It’s obviously not a fortune, but every bit helps.
How Do You Report Overseas Property Gains?
Reporting is through your self-assessment tax return. You have to:
- Complete the capital gains summary form
- List the details
- Submit online by 31 January after the tax year of the sale
Selling overseas assets can trigger the requirement if you don’t usually file a self-assessment. Don’t ignore it, because penalties for late reporting or payment add up fast. HMRC expects clear records:
- Completion dates
- Exchange rates
- Cost bases
- Evidence of any tax you paid abroad
Keep those documents organised, because they may be requested.
If your property is classed as a UK residential property (say you were still a UK resident but owned here), you have to report within 60 days of completion. That’s a tighter deadline, so know the difference. For overseas property sales, you still use the self-assessment route.
Example: Selling a Villa in Spain
Imagine you bought a Spanish villa for £150,000 equivalent in 2005, spent £20,000 on renovations, and sold it in 2023 for £300,000 equivalent. Your gain is £130,000. Deduct the annual exemption (say £6,000), which leaves £124,000 taxable gain.
If you’re in higher tax brackets, HMRC may charge 28% because it’s a property, which gives you a tax bill of around £34,720. If you paid Spanish tax on that gain, the UK will credit it under the double taxation agreement, so you don’t pay the full amount twice.
Can You Avoid Capital Gains Tax Legally?
There are ways to manage your exposure without breaking the law. For example, selling in a tax year where your income is lower or planning an ownership structure with a spouse can all help.
Some people use timing carefully: disposing of assets across different tax years spreads the gain and reduces the impact. Others ensure genuine residence in the property for periods to qualify for private residence relief. Avoiding capital gains tax doesn’t mean evading it; it means arranging your affairs so you don’t overpay.
What About UK Residents Moving Abroad?
If you’re moving overseas, the timing of your sale matters. Non-residents may avoid UK capital gains tax on some overseas assets after certain periods of non-residency, but HMRC has strict rules.
Becoming a non-resident for less than five years can result in your gains still being taxed when you return. This “temporary non-residence” rule catches people who thought a quick stint abroad would exempt them. Check residency status carefully before you sell.
Step-by-Step: How to Calculate UK Capital Gains Tax on Overseas Property
- Work out the sale proceeds in sterling, using official exchange rates.
- Deduct purchase cost, improvement costs, and selling costs.
- Subtract your annual exempt allowance.
- Add the gain to your income to see which income tax band you fall into.
- Apply the correct capital gains tax rate (10%/20% or 18%/28%).
- Factor in reliefs such as private residence relief if applicable.
- If tax was paid abroad, apply the double taxation agreements for credit.
- Complete the capital gains summary form as part of your self-assessment tax return.
- Pay tax owed by the January deadline.
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