A topic to be addressed after the purchase of real estate in London is the tax treatment inherent in the
future resale of the property itself, i.e. capital gains tax. Specifically, let us check in detail the
applicability of the tax on any capital gains of real estate value realised.
This tax should be analysed by distinguishing the taxable person into two categories:
a) natural person not resident in the United Kingdom;
b) legal person.
a) A non-UK resident individual is subject to a direct proportional tax of 28 % under the reform
effective from 01 April 2015. This rate is applied on the differential arising between the sale value and
the original purchase value by including certain deductible costs to the extent of 100 %. It should be
added that this rate is applied to the net realised value, but if it exceeds £12,000.00, this amount is
recognised as a Tax Allowance.
Thus : Vv1- (Va1 + C1 ) = Vn ; if Vn > £12,000.00 = 28 % on the net amount exceeding the Tax
Allowance ;
if Vn < £12,000.00 = no tax payable.
*Vv1 = sale value ; Va1= purchase value ; Vn = net value ; C1= deductible costs.
b) As far as the Capital Gains Tax treatment of a legal entity is concerned, the tax treatment is
simpler; i.e. any capital gain is taxed at the ordinary rate of 19 % and from 1 April at 18 % applied to
legal entities. For the deductibility of costs, the same accounting criteria are applied as for the ordinary
management of the SPV's object.
This tax is of crucial importance when one considers making a real estate purchase in London. Next
we will discuss inheritance tax in England and how it is determined and calculated.
All information on capital gains tax can be found at: http://www.gov.uk/capital-gains-tax.