Email your tax questions to Mike at: taxhacks@telegraph.co.uk
Dear Mike,
I enjoyed an illuminating hour reading your Q&A last month and it now seems inevitable that Labour will increase taxes.
I am now 77 and nearly emigrated to Canada during the Wilson years but having spent 20 years overseas, have recently returned to the UK.
I bought my current home in the UK in August 1999 in my sole name as my principal residence. Following my divorce in September 2003 I went overseas, but did not work.
This was spent mainly in Mexico but with some time in Canada and Spain. I returned to the UK on 1 February 2024 with my Mexican wife and son who is now enrolled at the local school.
During my time overseas I let out my UK property and paid income tax on the rental profits. I only returned to the UK for a few short visits to carry out some necessary maintenance to my property.
My current plan is to sell my home and move permanently to Glasgow. However, I am concerned that this will trigger a large capital gains tax bill.
It seems unfair that the rules for CGT on main homes rented out, while the owner lives with a partner in another main home overseas, are applied in my case.
What can I claim for my time overseas and is there any “rebasing” or allowance for inflation given on my return?
Your help would be appreciated.
– Gordon
Dear Gordon,
My last two articles involved a reader leaving the UK – so it is good to hear that you have decided to return to us.
I agree with you that the capital gains tax rules are unfair. In particular it has always seemed wrong to me that capital gains tax is applied on the overall sterling gain rather than on the real gain, adjusted for inflation.
The lower tax rate applied on capital gains is in part a recognition of this. If, as feared, the Chancellor decides to tax capital gains as income without an inflation adjustment it would be grossly unfair.
You will have been treated as not being UK resident during your time overseas but that will be of no assistance to you. Even if you had sold your home here before returning, the gain on the property would still have been caught by CGT.
You bought your house in August 1999 and lived there as your primary residence for four years.
You then spent the next 20 years and four months overseas. Having returned to Britain you lived in your house again from February of this year.
Although you are now considering a permanent move to Glasgow. I assume, noting the schooling of your son, that when you returned to live in your current house this was with the intention of some permanence at the time.
You say that you were not employed or otherwise working during your time outside the UK. When you were overseas you correctly submitted tax returns disclosing details of your UK rental income.
You are understandably concerned about the application of CGT when you sell your home. Unfortunately, there is no allowance for inflation.
You can calculate the gain with rebasing at 2015 or as explained in the HMRC manuals at CG73960 elect not to rebase and calculate as below.
