What This Is About
If you are an Indian national living abroad and you own UK property, hold shares in UK property rich companies, or invest through offshore structures that hold UK land, the UK tax authority (HMRC) has rolled out a series of changes that directly affect how your capital gains get taxed. These updates close loopholes, tighten definitions, and demand more proactive compliance from you as a non resident.
Let us walk through everything you need to know, from the new rules on protected cell companies to temporary non residence traps, treaty relief claims, and how all of this connects to your Indian tax obligations.
The Big Picture: Non Resident Capital Gains (NRCG) Rules
The UK taxes non residents on gains from disposing of UK land, UK residential property, and interests in "property rich" entities (companies where 75% or more of gross asset value comes from UK immovable property). This framework has been in place since 2015 for residential property and expanded in 2019 to cover all UK land and indirect disposals.
As an NRI, you fall squarely within these rules if you sell UK property or offload shares in a company that derives most of its value from UK land.
Key Change 1: Protected Cell Companies Now Assessed Cell by Cell
What Changed
Previously, when HMRC checked whether a protected cell company (PCC) qualified as a "UK property rich entity," they looked at the entire PCC as one unit. Some investors structured their holdings so that property heavy cells sat alongside non property cells, diluting the overall property percentage below the 75% threshold and escaping UK CGT.
From 26 November 2025, HMRC evaluates each individual cell of a PCC separately. If a specific cell meets the 75% UK property threshold and you hold a substantial indirect interest (25% or more), gains on disposing of that cell trigger UK CGT regardless of what the rest of the PCC looks like.
What This Means for NRIs
If you have invested in UK real estate funds or offshore structures that use PCCs, you can no longer rely on the overall entity level dilution strategy. Each cell stands on its own. Review your offshore holdings before this date and understand whether any individual cell crosses the property richness threshold.
Key Change 2: Double Taxation Treaty Claims Must Be Explicit
The Requirement
Starting 1 April 2026 for companies and 6 April 2026 for individuals, HMRC requires non residents to make explicit claims for relief under double taxation treaties. You cannot simply assume the India UK treaty protects you. You must actively elect for relief, typically through your Self Assessment tax return.
How the India UK Treaty Works Here
Under Article 13 of the India UK Double Taxation Avoidance Agreement (DTAA), gains from the alienation of immovable property may be taxed in the country where the property is situated. So the UK gets first right to tax gains on UK property. India also taxes your worldwide capital gains under its domestic rules.
The treaty prevents double taxation by allowing you to claim a foreign tax credit in India for UK CGT already paid. For example, if you pay UK CGT at 24% on a residential property gain, you can claim credit for that amount against your Indian tax liability on the same gain (which India might tax at 12.5% or 20% depending on the holding period and applicable provisions post 2024 Budget).
You must maintain detailed records of both UK and Indian computations to support your treaty relief claims in both jurisdictions.
Key Change 3: UK CGT Rates After 30 October 2024
For disposals on or after 30 October 2024, the UK CGT rates are:
| Asset Type | Basic Rate Taxpayer | Higher Rate Taxpayer | |---|---|---| | Residential property | 18% | 24% | | Other assets (commercial property, shares) | 10% | 20% |
These rates apply to NRIs disposing of UK land or interests in property rich entities.
Temporary Non Residence: A Trap NRIs Must Understand
HMRC helpsheet HS278 explains a rule that catches NRIs who leave the UK temporarily and return within 5 years. Here is how it works:
1. You were UK resident and you leave, becoming non resident under the Statutory Residence Test (SRT) 2. During your period of non residence (which lasts fewer than 5 complete tax years), you dispose of assets and realize gains 3. You return to the UK and become resident again 4. Those gains you made while non resident get treated as arising in the tax year you return and become chargeable to UK CGT
What Gets Caught
- Direct and indirect UK land disposals
- Gains attributed from closely controlled non resident companies
- Gains from settlor interested settlements
- Capital payments from trusts
- Foreign gains remitted to the UK during non residence (for those who previously claimed remittance basis)
NRI Scenario
Imagine you lived in the UK, moved to India for 3 years, sold a UK property during that time, and then returned to the UK. HMRC treats that gain as arising in your return year and taxes it accordingly. For 2024 to 2025 returnees, gains are treated as arising before 30 October 2024, so the prior rate structure (10% to 28%) applies, with losses allowable.
If you are planning a temporary move from the UK to India, staying away for at least 5 full tax years breaks this deeming rule.
The End of the Non Dom Regime and What It Means
From 6 April 2025, the UK abolished the traditional non domiciled (non dom) regime and the remittance basis of taxation. This has been replaced by the Foreign Income and Gains (FIG) regime, which gives new UK residents a 4 year exemption on foreign income and gains.
For NRIs who have been UK resident for more than 4 years, this means worldwide income and gains (including Indian investments) become fully taxable in the UK. This change increases the importance of the India UK DTAA for avoiding double taxation on your Indian portfolio.
Reporting Obligations You Cannot Ignore
Direct Disposals of UK Land
You must file a Non Resident Capital Gains Tax return within 60 days of completion, even if no tax is due. You do this through HMRC's dedicated online service.
Indirect Disposals
If you sell shares in a property rich company, you report this through your standard Self Assessment return using form SA108 (boxes 45 to 52 for NRCGT related entries).
Penalties for Getting It Wrong
- Late filing penalties range from £100 to over £1,000
- Errors due to carelessness can attract penalties up to 200% of the tax owed
- Failure to comply with NRCG reporting can result in penalties up to 100% of the tax
Rebasing Relief: Use It If You Qualify
For UK residential property held before 6 April 2019, you can elect to rebase the property's value to its market value on 5 April 2019. This means you only pay CGT on gains accruing after that date, not on the entire period of ownership. You must actively claim this relief.
Investment Impact: What NRIs Should Think About
These changes affect how NRIs structure and manage their cross border property and investment portfolios in several ways:
UK Property Investments
Higher CGT rates (up to 24% residential) combined with stricter NRCG rules make UK property less tax efficient for NRIs compared to a few years ago. Factor in the 60 day reporting requirement and the administrative burden increases significantly.
Offshore Fund Structures
If you hold UK property exposure through PCCs or similar cellular structures, the cell by cell assessment rule from November 2025 removes a key planning advantage. Restructuring before this date could be worthwhile, but seek professional advice on the tax consequences of any reorganization.
Indian Portfolio Considerations
With the non dom regime ending and worldwide taxation kicking in for long term UK residents, NRIs who also maintain UK residence need to think carefully about their Indian stock market investments, mutual funds, ETFs, InvITs, and REITs. Gains from these Indian investments may now be taxable in the UK as well, making the India UK DTAA credit mechanism essential for avoiding double taxation.
Treaty Planning
The India UK DTAA allows you to claim credit for the higher of the two countries' tax on the same gain. For instance, if the UK taxes a residential property gain at 24% and India would tax the same gain at 12.5%, you effectively pay the higher rate but avoid paying both. Proper documentation and timely claims in both jurisdictions are critical.
Action Items for NRIs
1. Review PCC and offshore structures before 26 November 2025 to assess whether individual cells meet the 75% UK property richness threshold 2. Prepare for explicit treaty relief claims from April 2026 onward by maintaining parallel UK and Indian capital gains computations 3. Check your Statutory Residence Test status carefully, especially if you split time between India and the UK. Spending 90 or more days in the UK risks triggering residence 4. File NRCG returns within 60 days of completing any direct UK land disposal, even if the gain is nil or covered by reliefs 5. Claim rebasing relief for pre 2019 residential property if it reduces your taxable gain 6. Coordinate with tax advisors in both countries to ensure your India UK DTAA claims are consistent and properly documented 7. If you left the UK temporarily, ensure you stay non resident for at least 5 full tax years to avoid the temporary non residence deeming rules 8. Factor in the FIG regime if you are a newer UK resident, as the 4 year foreign income and gains exemption may shelter your Indian investment returns during that window
Key Dates at a Glance
| Date | What Happens | |---|---| | 30 October 2024 | New higher UK CGT rates take effect | | 6 April 2025 | Non dom regime abolished, FIG regime begins | | 26 November 2025 | PCC cell by cell assessment rule applies to disposals | | 1 April 2026 | DTT claim clarifications effective for companies | | 6 April 2026 | DTT claim clarifications effective for individuals |
Where to Find More
- [HMRC Non Resident Capital Gains guidance](https://www.gov.uk/government/publications/capital-gains-tax-non-resident-capital-gains/non-resident-capital-gains)
- [HMRC HS278 Temporary Non Residents helpsheet](https://www.gov.uk/government/publications/temporary-non-residents-and-capital-gains-tax-hs278-self-assessment-helpsheet/hs278-temporary-non-residents-and-capital-gains-tax-2025)
- [SA108 Notes for 2024 to 2025](https://assets.publishing.service.gov.uk/media/67e1612564220b68ed6a7009/SA108-Notes-2025.pdf)