Clarification of Capital Gains on UK House Sale
Mar 28th 2011, 12:43 am
#1
Forum Regular
Thread Starter
Joined: May 2010
Posts: 31
Clarification of Capital Gains on UK House Sale
Hi,
I've trawled the past threads and the internet to find this info and just wanted to check if this is how it really worked out for anyone.
We have been left the UK almost 6 years (summer 2005), we have a house in the UK that has been let for that time. We have been in the US almost 2 years on an L1b visa and are considering selling our UK property, buying here and applying for a green card.
Regarding Capital Gains in the UK
http://news.bbc.co.uk/2/hi/business/7132838.stm
Another very valuable relief is something called the lettings exemption, which applies where a house that has been someone's PPR is let as residential accommodation. This situation might arise where someone moves but decides to keep their old property and let it. For example, on an eventual sale five years after moving out, capital gains in the final three years of ownership would be covered in any event, as they are covered by PPR relief.
This would leave two years of ownership potentially liable to CGT.
But because the property was let there is an additional exemption available.
The relief is subject to restrictions with an overall maximum of £40,000 of capital gains, but is available to both husband and wife (or civil partners) where the house is in joint names, putting the exempt gain up to £80,000.
CGT would be applied to the gains in those two years if, for instance, the property had been left standing empty.
Bearing this in mind I don't think we will be due Capital Gains in the UK, we would be due for assessment of it on any gains from 2008-2011 but the market hasn't gained at all in that time, certainly not by 80,000GBP.
I've read on threads on here that if we are not green card holders we are not due for US Capital Gains on a UK house sale but I haven't been able to find much info, only this
http://www.azuretax.com/us-taxes/us-...tal-gains-tax/
In general, nonresident aliens are taxed only on U.S. source income.
Can anyone confirm that this is the way it worked for them after going through the process?
Thanks
I've trawled the past threads and the internet to find this info and just wanted to check if this is how it really worked out for anyone.
We have been left the UK almost 6 years (summer 2005), we have a house in the UK that has been let for that time. We have been in the US almost 2 years on an L1b visa and are considering selling our UK property, buying here and applying for a green card.
Regarding Capital Gains in the UK
http://news.bbc.co.uk/2/hi/business/7132838.stm
Another very valuable relief is something called the lettings exemption, which applies where a house that has been someone's PPR is let as residential accommodation. This situation might arise where someone moves but decides to keep their old property and let it. For example, on an eventual sale five years after moving out, capital gains in the final three years of ownership would be covered in any event, as they are covered by PPR relief.
This would leave two years of ownership potentially liable to CGT.
But because the property was let there is an additional exemption available.
The relief is subject to restrictions with an overall maximum of £40,000 of capital gains, but is available to both husband and wife (or civil partners) where the house is in joint names, putting the exempt gain up to £80,000.
CGT would be applied to the gains in those two years if, for instance, the property had been left standing empty.
Bearing this in mind I don't think we will be due Capital Gains in the UK, we would be due for assessment of it on any gains from 2008-2011 but the market hasn't gained at all in that time, certainly not by 80,000GBP.
I've read on threads on here that if we are not green card holders we are not due for US Capital Gains on a UK house sale but I haven't been able to find much info, only this
http://www.azuretax.com/us-taxes/us-...tal-gains-tax/
In general, nonresident aliens are taxed only on U.S. source income.
Can anyone confirm that this is the way it worked for them after going through the process?
Thanks
Mar 30th 2011, 9:58 am
#2
Forum Regular
Joined: Nov 2007
Location: South Staffs UK & Gulf Coast Florida
Posts: 137
Re: Clarification of Capital Gains on UK House Sale
If you have been ex-UK for 5 full tax years then there should be no CGT applicable.
Mar 30th 2011, 12:29 pm
#3
BE Commentator
Joined: Feb 2010
Location: Los Angeles, California
Posts: 8,424
Re: Clarification of Capital Gains on UK House Sale
Hi,
I've trawled the past threads and the internet to find this info and just wanted to check if this is how it really worked out for anyone.
We have been left the UK almost 6 years (summer 2005), we have a house in the UK that has been let for that time. We have been in the US almost 2 years on an L1b visa and are considering selling our UK property, buying here and applying for a green card.
Regarding Capital Gains in the UK
http://news.bbc.co.uk/2/hi/business/7132838.stm
Another very valuable relief is something called the lettings exemption, which applies where a house that has been someone's PPR is let as residential accommodation. This situation might arise where someone moves but decides to keep their old property and let it. For example, on an eventual sale five years after moving out, capital gains in the final three years of ownership would be covered in any event, as they are covered by PPR relief.
This would leave two years of ownership potentially liable to CGT.
But because the property was let there is an additional exemption available.
The relief is subject to restrictions with an overall maximum of £40,000 of capital gains, but is available to both husband and wife (or civil partners) where the house is in joint names, putting the exempt gain up to £80,000.
CGT would be applied to the gains in those two years if, for instance, the property had been left standing empty.
Bearing this in mind I don't think we will be due Capital Gains in the UK, we would be due for assessment of it on any gains from 2008-2011 but the market hasn't gained at all in that time, certainly not by 80,000GBP.
I've read on threads on here that if we are not green card holders we are not due for US Capital Gains on a UK house sale but I haven't been able to find much info, only this
http://www.azuretax.com/us-taxes/us-...tal-gains-tax/
In general, nonresident aliens are taxed only on U.S. source income.
Can anyone confirm that this is the way it worked for them after going through the process?
Thanks
I've trawled the past threads and the internet to find this info and just wanted to check if this is how it really worked out for anyone.
We have been left the UK almost 6 years (summer 2005), we have a house in the UK that has been let for that time. We have been in the US almost 2 years on an L1b visa and are considering selling our UK property, buying here and applying for a green card.
Regarding Capital Gains in the UK
http://news.bbc.co.uk/2/hi/business/7132838.stm
Another very valuable relief is something called the lettings exemption, which applies where a house that has been someone's PPR is let as residential accommodation. This situation might arise where someone moves but decides to keep their old property and let it. For example, on an eventual sale five years after moving out, capital gains in the final three years of ownership would be covered in any event, as they are covered by PPR relief.
This would leave two years of ownership potentially liable to CGT.
But because the property was let there is an additional exemption available.
The relief is subject to restrictions with an overall maximum of £40,000 of capital gains, but is available to both husband and wife (or civil partners) where the house is in joint names, putting the exempt gain up to £80,000.
CGT would be applied to the gains in those two years if, for instance, the property had been left standing empty.
Bearing this in mind I don't think we will be due Capital Gains in the UK, we would be due for assessment of it on any gains from 2008-2011 but the market hasn't gained at all in that time, certainly not by 80,000GBP.
I've read on threads on here that if we are not green card holders we are not due for US Capital Gains on a UK house sale but I haven't been able to find much info, only this
http://www.azuretax.com/us-taxes/us-...tal-gains-tax/
In general, nonresident aliens are taxed only on U.S. source income.
Can anyone confirm that this is the way it worked for them after going through the process?
Thanks
I see no mention of how you have been treating your UK rental income while here in the US for your US tax returns.
Talk to your talk advisor.
Apr 24th 2011, 2:15 pm
#4
Just Joined
Joined: Apr 2011
Location: Oklahoma
Posts: 14
Re: Clarification of Capital Gains on UK House Sale
I too have been in the US since 2005 with my family and have just sold our UK property and invested the gains in the US. Our UK house was rented also.
I worked for GE and had my taxes compiled for me (Ernst & Young), this was great as I could get tax advice as and when I needed it.
I paid US taxes on all my rental profit but had many deductions that would offset the profit, I never actually made anything so this helped my return each year. From the start your return should have had a value on the property entered on schedule E and submitted form 4562 with your 1040. When I sold the house in 2010 the depretiation figure was used (filed last month) and I paid tax on the remaining profit, this meant that the figure was alot lower than I thought. At first I thought it would be close to 20% of the gain, E&Y had told me that you use the exchange rate on the date you purchased the house (to convert to $), the exchange rate on the date of sale then minus one with the other, thats the 'profit'. This wasnt the case and the figure was alot less, on £75k profit I owed somewhere in the region of $10k, I cannot put an exact figure as my other income affected this.
One thing to note, the profit will be classed as an income so if you go over some thresholds you will lose the benefit of some dependants (if you have any).
I used a tax professional to complete the return (H&R Block Professional) as I would have no idea how to complete!
I worked for GE and had my taxes compiled for me (Ernst & Young), this was great as I could get tax advice as and when I needed it.
I paid US taxes on all my rental profit but had many deductions that would offset the profit, I never actually made anything so this helped my return each year. From the start your return should have had a value on the property entered on schedule E and submitted form 4562 with your 1040. When I sold the house in 2010 the depretiation figure was used (filed last month) and I paid tax on the remaining profit, this meant that the figure was alot lower than I thought. At first I thought it would be close to 20% of the gain, E&Y had told me that you use the exchange rate on the date you purchased the house (to convert to $), the exchange rate on the date of sale then minus one with the other, thats the 'profit'. This wasnt the case and the figure was alot less, on £75k profit I owed somewhere in the region of $10k, I cannot put an exact figure as my other income affected this.
One thing to note, the profit will be classed as an income so if you go over some thresholds you will lose the benefit of some dependants (if you have any).
I used a tax professional to complete the return (H&R Block Professional) as I would have no idea how to complete!
Apr 24th 2011, 8:31 pm
#5
BE Site Lead
Joined: Aug 2004
Location: MA, USA
Posts: 92,170
Re: Clarification of Capital Gains on UK House Sale
Good luck that H&R didn't b@ll@ck things up for you!
Apr 24th 2011, 9:59 pm
#6
Just Joined
Joined: Apr 2011
Location: Oklahoma
Posts: 14
Re: Clarification of Capital Gains on UK House Sale
Yeh, I did have some reservations about H&R but the lady I dealt with does many expat returns and was recommended by another expat here who has used her for several years. Based on the information that E&Y provided me and the return I reviewed I am confident its ok....hopefully 
Apr 24th 2011, 11:49 pm
#7
Forum Regular
Thread Starter
Joined: May 2010
Posts: 31
Re: Clarification of Capital Gains on UK House Sale
Thanks for the info,
Though I've been out of the UK since 2005 I've only been in US since 2009. Our house value and rental income have been declared on our US tax return since moving here.
It seems we need some reliable tax advice before proceeding, I'm not confident in the advice we get right now. Additionally we are getting mixed messages on the green card issue which makes us cautious about selling up. We have support from our employer on tax returns and visa issues but I think maybe its time to seek our own answers and try to push the matter along a bit, I'm not confident that they know what they are doing.
Though I've been out of the UK since 2005 I've only been in US since 2009. Our house value and rental income have been declared on our US tax return since moving here.
It seems we need some reliable tax advice before proceeding, I'm not confident in the advice we get right now. Additionally we are getting mixed messages on the green card issue which makes us cautious about selling up. We have support from our employer on tax returns and visa issues but I think maybe its time to seek our own answers and try to push the matter along a bit, I'm not confident that they know what they are doing.
