Q&A: tax on sale of properties by non-resident

Croner VIP Tax Team

In this week’s Q&A, Mohammed Abdulhai, adviser at Croner VIP Tax Team, explains the tax implications of selling UK properties when living overseas and receiving state pension.

Q. We have a client who moved to France in the 2025-26 tax year. In the 2026-27 tax year they will be selling two residential properties in the UK and receive a UK state pension. How should the sale be treated for tax purposes considering they are now a resident of France?

A. The client will need to be aware of the statutory residence test (SRT) as this dictates whether you are UK resident or not as per Finance Act 2013 Schedule 45.

Sale of properties

Non-UK resident individuals are not always within the charge to capital gains tax (CGT), but they will be in this instance as the disposals are in respect of UK land and property as set out in T section 1A(3(b) Taxation on Chargeable Gains Act 1992 (TCGA 1992).

However, when the UK residential property is disposed of, only the part of the gain arising after 5 April 2015 is chargeable to CGT as this was the date the legislation took effect (Sch 4AA, para 6 TCGA 1992).

The default method of calculating the gain is to use the market value of the asset at 5 April 2015. An election is available to use the original cost and use time apportionment to calculate the gain.

Remember that whether a gain or loss arises, disposals by non-residents will need to be reported under the 60-day CGT reporting regime (FA 2019 Sch. 2 para 1(1)(a)).

UK state pension

 The UK state pension is a UK source of income and so would by default be chargeable to UK income tax. 

If the individuals are European Economic Area (EEA) nationals, then they are entitled to the  personal allowance under s56 Income Tax Act 2007 (ITA 2007). If the state pension is their only UK income, then in a full tax year of non-residence, they would have no UK income tax liability as state pension is disregarded income under ITA 2007 s813(1)(c) and so s811 would apply to ensure no income tax liability arises.

If they do have other income, then they may need to consider making a claim for relief under the UK/France double taxation agreement.

As a social security payment, state pensions are not regarded as paid in consideration of past employment and are therefore not within Article 18: Pensions schemes.

As Article 18 does not apply to state pensions, we must consider the other income article of the DTA with France.

Article 23 states that it is taxable only where they are a resident: 

‘Items of income beneficially owned by a resident of a contracting state, wherever arising, which are not dealt with in the foregoing Articles of this Convention, other than income paid out of trusts or the estates of deceased persons in the course of administration, shall be taxable only in that state.’

Therefore, the UK state pension remains taxable in France only since they are a French resident

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