What are the tax rules for non-UK residents selling shares?

When selling shares held in a UK company, individuals normally pay Capital Gains Tax, or CGT, on any profit they make from the sale.

However, the rules can be different for non-UK residents.

In this blog, we’ll look at the circumstances under which non-UK residents selling shares may be required to pay Capital Gains Tax and explain how any gains on the disposal of shares are reported to HMRC.

Do non-UK residents pay tax when selling shares?

Individuals who are non-UK residents for tax purposes usually pay Capital Gains Tax on the profit or gains they make from selling or ‘disposing of’ UK property and land. This generally includes:

• residential UK property or land, including any buildings on the land;
• non-residential UK property or land;
• ‘mixed-use’ property – this is property that has both residential and non-residential elements; and
• rights to assets that derive at least 75% of their value from UK land.

However, non-residents generally don’t pay Capital Gains Tax on other types of UK assets, such as shares in UK companies, unless either of the following applies:

• they return to the UK within 5 years of leaving; or
• they sell shares in a company that is ‘UK property rich’, and they meet the conditions for an indirect disposal.

Sales of shares in companies which are ‘UK property rich’ are outside the scope of this article, but we’ve included links to HMRC’s guidance on this in the description below.

In both situations, the general rule is that individuals must report and pay Capital Gains Tax to HMRC on any gains they make on the disposal of shares. The ‘gain’ is normally the difference between what an individual paid for the shares and what an individual sold them for.

• An introduction to Capital Gains Tax for small businesses
• Rules and restrictions on share transfers in a private limited company
• How to register for Self Assessment

Typically, basic rate taxpayers pay Capital Gains Tax on shares at a rate of 10%. Any gains above the basic rate tax band attract a rate of 20%. If an individual is a higher-rate or additional-rate taxpayer, they will likely need to pay Capital Gains Tax at 20% on the entire gain.

Additionally, in certain circumstances, Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, may be available. This provides for a reduced rate of 10% on all gains.

Non-UK residents whose disposals fall outside the scope of UK tax may be liable to tax in their country of residence instead. Individuals should always seek appropriate professional advice relating to their tax jurisdiction of residence.

Returning to the UK within 5 years of moving abroad

If an individual moves back to the UK after living overseas for a period of time, that individual would likely become a UK resident again for tax purposes.

Under the temporary non-residence rules, that individual would potentially need to pay UK tax on certain income or gains, including any gain made on the disposal of UK shares during the period of non-residence.

If an individual is abroad for less than a full tax year, they will likely remain a UK tax resident and consequently a sale of UK shares during that period would likely be chargeable to Capital Gains Tax in the tax year it arises.

If Capital Gains Tax is payable, this must be reported in a Self Assessment tax return or, if eligible, using HMRC’s ‘real time’ Capital Gains Tax service.

Capital Gains Tax is generally payable on any taxable gains made above an individual’s annual Capital Gains Tax allowance. This is currently £3,000 for individuals for the 2024/2025 tax year.

The deadline for reporting the gains in a Self Assessment tax return is 31 January after the end of the tax year in which any UK residency resumes. Any Capital Gains Tax owed must be paid by the same deadline.

Where the ‘real time’ Capital Gains Tax service is used, gains must be reported to HMRC by 31 December after the end of the tax year in which any UK residency resumes – with the deadline to pay tax being 31 January.

What is the test to determine if an individual is a UK resident for tax purposes?

If you are unsure of your tax residency, we always recommend seeking advice from an appropriately qualified tax advisor; however, the following sets out the position in general terms.

Under the Statutory Residence Test, an individual is likely to be treated as a UK resident for tax purposes if:

• that individual spends at least 183 days in the UK in the tax year;
• their only home is in the UK for at least 91 days in a row, and they visited or stayed in that home for at least 30 days of the tax year; or
• they worked in the UK full-time for any period of 365 days.

However, other considerations may also be relevant, such as the sufficient ties test, which relates to the amount of time an individual spends in the UK and the number of additional ties an individual has here, such as work or family.

Generally, individuals are non-UK resident for tax purposes if either of the following applies:

• they spend fewer than 16 days in the UK, or 46 days if they have not been a UK resident for the 3 previous tax years; or
• they work overseas full-time and spend fewer than 91 days in the UK, of which no more than 30 are spent working.

HMRC’s residence status checker and the official guidance on the Statutory Residence Test provide further guidance. However, this is not always straightforward, and we strongly recommend that you discuss your position with your tax advisor before taking any action relating to your tax residency.

So, there you have it

We hope this blog has helped you better understand some of the key tax rules relating to non-UK tax residents selling shares in UK companies.

However, working out your tax residence and the scope of Capital Gains Tax can be challenging, particularly if you are temporarily non-resident for tax purposes. You should always seek professional advice from an appropriately qualified tax advisor before taking action relating to your tax residency.

Please note that the information provided in this post is for general informational purposes only and does not constitute legal, tax, or professional advice.

While our aim is that the content is accurate and up-to-date, it should not be relied upon as a substitute for tailored advice from qualified professionals.

Look at the 1st Formations blog for more tips and advice on forming and running a company.