Can we avoid CGT when selling a property in the uk

What is CGT 

Phil

Capital Gains Tax

Its Capital gains tax which is currently at 19%

If you already here, as tax residents then there is no legal way to avoid paying. The only way is to sell in the year before you move which is where the "good time to sell" comes in..

Be very wary of schemes that say you can save tax as this could be taken as tax evasion rather than avoidance, with possible swingeing penalties! The tax people are not daft…

It starts at 19% for Capital Gains of 6,000€ and then rises to 26% on Capital Gains of 200,000€+

If you take expert advice from both UK and Spanish tax advisers, there may be options around this. This is my interpretation of the laws around this (but I am no expert!)...

In the UK you can gift your property to your son / daughter (or sell it to them for as little as £1). As long as you live for 7 years after, there is no Inheritance Tax due on this gift when you die. You would, however, have to pay UK CGT on the true value of the house - but that would be reduced by your 'private residence relief' (basically the CGT is reduced by the percentage of time that you lived in the property as your main home). You also offset costs incurred when buying the property, any improvements while you owned it and then the costs of the gifting transfer.

in Spain, there is 'gift tax', which varies by region and there are allowances to be set off against the tax, which also vary by region (for example, Murcia allows 99% tax relief); so if you gift the house to your son / daughter (but this also includes siblings, uncles & aunts, nephews & nieces and various other close relatives (parents or children-in-law, step-parents or step-children), then you will pay tax on only 1% of the value of the gift.

Your son / daughter could then sell the property and then return the proceeds to you. You would pay 'gift tax' on the money received at the same rates as above.

I have read examples on the websites of various law firms and tax advisers covering all of the above - but none where they are all used together. Maybe worth exploring though?

Hi Phil..CGT is Capital Gains Tax 

Gloria

Hi RitchT

Thank you for your detailed information, we will certainly look into it.

Gloria

If you are already there, this may not be relevant to you and I have no idea how to get around it.  For anyone moving there doing 90/180 with a property to sell, it probably is. 

The advice I have been given is this.  

The Spanish tax year runs from Jan1st to Dec 31st which makes this explanation a little easier.

If you sell a UK property and become Tax Resident by virtue of spending 183 days in Spain in the same tax / calendar year (nothing to do with your 5 year Visa / Spanish residency application), then you are liable for CGT on that sale.  

So lets say you sold your property in Jan 2024 and became Tax Resident in Spain in December 2024, even though you sold it long before your tax liabilities were established in Spain, it is the same tax year and they will fleece you.  

Conversely, if you sold your property in late Dec 2023 and became Tax Resident in early Jan 2024, you wouldn't be liable for CGT even though you became tax resident only a few days later.  We have this timing issue with my brother's planned move and are aiming for him to sell in late 2023 so he can move straight to Spain soon as he sells (well, any time there is less than 183 days left in the year, so say 4th July 2023).

Remember the 183 days would include any holidays or working periods anywhere in Spanish territories.  So if you do 10 days boogying in Majorca, you have 173 days left in the tax year to be at your Spanish villa.