Q.1164 UK Citizen Capital Gains

Tax in UK on Property sold in

India

Question: Hello, I am a British Citizen/ Over-cease Indian. I had a flat in India. Recently sold, and paid tax on long term Capital Gain on it. If on this Capital gain tax is again payable again in England or no tax again in England. Please advise. Thanks. Answer: Taxation in UK would depend on your UK tax residence status as residency affects whether tax is payable in UK on foreign income. Residency status is important because: • UK Residents normally are required to pay UK tax on their worldwide income. UK residents may also have to pay tax in the country where they derived income from or made a capital gain. Where tax is payable in two countries relief from tax agreements between countries is available to the tax payers so that they don’t have to pay tax on the same income twice. Credits under DTAA agreements help avoid double taxation. • On the other hand, UK Non-Residents must pay tax in UK only on their UK income. They don’t have to pay tax in UK on their foreign income. [Non-residents may have to pay UK tax on overseas property if they return to the UK within 5 years of leaving]

Capital Gains Tax in UK

Every year those who have capital gains get an annual tax free allowance which is known as the ‘Annual Exempt Amount’ (AEA). Capital Gains tax in UK is payable only if the gains are above the individuals tax free allowance (AEA). • Annual Exempt Amount for the year 2017-2018 is £11,300 for individuals • Annual Exempt Amount for the year 2018-2019 is £11,700 for individuals A UK resident who has already paid capital gain taxes in India and is liable to pay capital tax in UK on the sale of foreign property; would by virtue of article 24 the UK/India Double Tax Avoidance Agreement [DTAA] get credit in UK for the tax paid in India when filling UK taxes. Tax calculation on capital gain tax payable in UK would also take into account the amount of gain in relation to the UK Annual Exempt Amount (AEA). OCI holders from UK who now permanently reside in India should consider letting the UK tax authorities know of their non-residential status by filing form P85 when they decide to leave UK or after leaving. The purpose of this form is to inform the UK revenue and customs of that they are no longer resident in the UK. This way they can avoid their foreign income being taxed in UK. The information on this page is general and not meant to be any form of tax advice. I would suggest you consult a tax advisor for professional help to file your taxes in UK.