From 6 April 2015, a capital gains tax (CGT) charge will be introduced on future gains made by non-residents selling UK residential property, according to the UK Government’s Autumn statement.

This change will be limited for residents of higher-tax economies, who’ll be credited (under double tax treaties) for any UK capital gains tax paid.

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David Bell, senior wealth planner at Lombard Odier, said the move will bring the UK in line with other countries that tax capital gains on residential property, regardless of where the owner lives.

He explained: "The biggest impact will be felt by those in low-tax economies who own homes directly, which they occupy for less than six months a year (i.e. they are non-resident)."

Commenting on the CGT, Daniel Crowther, partner in the private client advisory practice at KPMG UK, said: "The halving of the final period exemption from capital gains tax came as a surprise and will be a shock for many second home owners."

He added: "It reduces the incentive to ‘flip’ a house – that is to buy a property, use it as a principal private residence and continue to benefit from the CGT exemption for the next three years."

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The impact on London property prices of the change on this group of buyers will be offset by a number of factors:

  • Increasingly, wealthy individuals are choosing to become UK resident.
  • For privacy reasons many non UK residents from low-tax economies own properties through companies. Capital gains generated on UK homes worth more than £2 million, owned through a company, have been taxable since April 2013.
  • The tax charge is only payable when a gain is made on sale. It’s therefore easier for individuals to manage than a wealth tax on their non-revenue producing home.
  • If the base value is set at 2015 levels, existing owners will only pay tax on future gains. "