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UK Capital Gains Tax for NRIs: New Rules on Property Disposals, DTT Claims, and Temporary Residence (2025–26)

The UK has tightened capital gains tax (CGT) rules for non-resident Indians disposing of UK land and property, effective from April 2026. Key changes include stricter assessment of property-rich entities (especially protected cell companies), clearer double taxation treaty (DTT) claim procedures under the UK-India treaty, and enhanced reporting requirements. NRIs face CGT at 18–24% on residential property and 10–20% on non-residential assets, with no relief for non-remittance, and must file Self Assessment returns within 60 days of disposal or face penalties up to 100% of tax due.

Source: HMRC UK — NRI Tax Obligations

UK Capital Gains Tax for NRIs: What Changed in 2025–26

If you are an Indian national living abroad and own UK property or hold shares in UK property-rich companies, the UK tax authorities have just made compliance stricter. Here is what you need to know.

Why the UK Changed These Rules

The UK government has refined how it taxes capital gains when non-residents (including NRIs) sell UK land, property, or indirect interests in UK property-rich entities. The changes aim to close loopholes that allowed some non-residents to structure their holdings through offshore vehicles—particularly protected cell companies (PCCs)—to avoid or defer UK capital gains tax.

These updates are part of the Finance Bill 2025–26, announced at Budget 2025, and align with the UK's broader post-Brexit tax reform agenda and global efforts to prevent cross-border tax avoidance.

Key Changes: What Is Different Now

#### 1. Protected Cell Companies (PCCs) Are Now Assessed Cell by Cell

Effective from 26 November 2025 for disposals by PCCs themselves.

Previously, the entire PCC was tested for "property richness" as a single unit. Now, each individual cell within a PCC is assessed separately. This means assets and liabilities segregated within different cells are no longer mixed together for tax purposes.

Why does this matter to you? If you hold UK property through an offshore PCC structure, HMRC will now look at whether your specific cell is property-rich, not the whole company. This prevents you from using other cells' non-property assets to dilute the property-richness test and avoid CGT.

#### 2. Clearer Rules on Double Taxation Treaty (DTT) Claims

Effective from 1 April 2026 for companies and 6 April 2026 for individuals.

The UK has clarified when and how non-residents must claim relief under double taxation treaties, particularly the UK-India DTT. If you are an NRI disposing of UK property, you now have more precise guidance on:

  • When to file a DTT claim
  • How to report indirect disposals (e.g., selling shares in a UK property-rich company)
  • How to coordinate relief between UK and Indian tax authorities
Under Article 13 of the UK-India DTT, the UK has the right to tax gains on immovable property (land and buildings) located in the UK. However, India may also tax you on worldwide gains if you are an Indian resident. The DTT allows you to claim a foreign tax credit in India for UK CGT paid, but you must file the claim correctly and on time.

#### 3. Stricter Reporting of Indirect Disposals

Non-residents must now more precisely report when they sell indirect interests in UK property-rich entities. For example, if you own shares in an Indian company that owns a UK property, and you sell those shares, you may trigger UK CGT on the indirect disposal. The new rules require clearer disclosure of these transactions.

Who Is Affected: Direct and Indirect Disposals

You are liable for UK CGT if you:

  • Directly own and sell UK land or residential property (e.g., a flat in London)
  • Indirectly own UK property through a company, trust, or partnership where you hold a substantial interest (typically 25% or more)
  • Hold shares in a UK property-rich entity (a company where more than 50% of assets are UK land)
This applies regardless of whether you remit the proceeds to India or keep them in the UK. Non-remittance does not shield you from UK tax.

CGT Rates and Thresholds for NRIs (2025–26)

  • Residential property: 18% (basic rate) or 24% (higher rate), depending on your income
  • Non-residential property: 10% (basic rate) or 20% (higher rate)
  • Annual exempt amount: £3,000 (2025–26)
You pay CGT only on gains above £3,000 in a tax year.

Reporting and Payment Deadlines

  • File a Self Assessment return if your gains exceed the reporting threshold
  • Pay within 60 days of the date of disposal (not the end of the tax year)
  • Use the Real Time Capital Gains Tax service or traditional Self Assessment (SA100 form)
  • Consult HMRC Helpsheet HS307 for detailed reporting guidance
Missing the 60-day payment deadline triggers interest and penalties.

Temporary Non-Residents: A Special Trap for Returning NRIs

If you left the UK as a resident and returned after a short absence (up to 5 years), you are a "temporary non-resident" (TNR). Under TNR rules, capital gains you made on non-UK assets while you were non-resident are "deemed" to accrue in the year you return to the UK and are taxable at that time.

Example: You left the UK in April 2018 as a resident, lived in India, and sold Indian shares for a £35,000 gain in 2022 (while non-resident). You returned to the UK in April 2024. The £35,000 gain is now taxable in your 2024–25 UK return, even though the sale happened years ago.

This rule applies to:

  • Gains on non-UK land and property
  • Gains on shares in non-UK companies
  • Attributed gains from non-resident trusts and companies you control
You cannot use the original cost basis; you must use the cost at the time of disposal. The UK-India DTT does not override TNR rules, but you can claim a foreign tax credit in India if you paid Indian capital gains tax on the same gain.

How the UK-India DTT Helps (and Where It Doesn't)

The UK-India Double Taxation Treaty provides relief in two ways:

1. Taxing rights allocation: Article 13 gives the UK the right to tax gains on UK immovable property. India agrees not to tax these gains (or to allow a credit if it does). 2. Foreign tax credit: If both countries tax the same gain, India allows you to credit the UK tax paid against your Indian tax liability.

However, the DTT does not:

  • Exempt you from UK CGT on UK property
  • Override TNR rules
  • Apply to gains on non-UK assets (unless specifically covered by the treaty)
You must file a DTT claim with HMRC to get relief; it is not automatic.

Inheritance Tax (IHT) Exposure

If you own UK property and pass away, your UK situs assets are subject to UK Inheritance Tax. The nil-rate band is £325,000 (2025–26). If your UK property and other UK assets exceed this, your heirs pay IHT at 40% on the excess. This applies even if you are non-resident.

The Non-Dom Abolition and Its Indirect Impact on NRIs

From 6 April 2025, the UK abolished the "non-dom" (non-domicile) tax status. This does not directly affect NRIs, but it signals a broader shift: the UK is moving away from allowing non-residents to exclude foreign income and gains from UK tax. The new Foreign Income and Gains (FIG) regime taxes unremitted foreign gains after 4 years for new UK residents. If you return to the UK as a resident, this will affect how your Indian capital gains are taxed.

Penalties for Non-Compliance

  • Late filing: £100 minimum, escalating to 200% of tax due for offshore non-compliance
  • Late payment: Interest plus penalties starting at 5% of unpaid tax
  • Failure to report: Up to 100% of tax due
  • Discovery assessments: HMRC can assess you up to 20 years back if it discovers unreported gains

What NRIs Should Do Now

1. Review your UK property holdings. Do you own UK land directly or indirectly via a company, trust, or partnership?

2. Check PCC structures. If you hold UK property through a protected cell company, review the cell structure before 26 November 2025 to understand how the new rules apply.

3. Gather documentation. Collect: - Original purchase contracts and costs - Valuations as of 5 April 2019 (for rebasing) - Disposal contracts and sale proceeds - Any DTT claims filed with HMRC or Indian tax authorities

4. Plan for DTT relief. If you are selling UK property, file a DTT claim with HMRC and coordinate with your Indian tax return to claim a foreign tax credit.

5. Understand your residence status. Are you a non-resident, temporary non-resident, or returning resident? Your status determines which gains are taxable in the UK.

6. File on time. Use Self Assessment or the Real Time CGT service. Pay within 60 days of disposal. File your full tax return by 31 January following the tax year.

7. Seek professional advice. UK-India tax planning is complex. Engage a UK tax advisor familiar with NRI issues and DTT claims.

Investment Perspective: How This Affects NRI Property Investors

These stricter rules increase the compliance burden and tax cost of holding UK property as an NRI. If you are considering buying UK residential property for investment or personal use, factor in:

  • CGT at 24% on gains (after £3,000 exemption)
  • 60-day payment deadlines
  • Potential IHT at 40% on death
  • Stricter reporting of indirect holdings
For NRIs with existing UK property, the new PCC rules mean you cannot rely on offshore structures to defer or avoid tax. The UK is signaling that it will enforce CGT rigorously on non-resident property owners.

If you are planning to return to the UK as a resident, be aware that TNR rules will catch gains on non-UK assets (including Indian property and shares) made during your non-residence period. Plan your return timing carefully if you expect significant capital gains in India.

Key Dates to Remember

  • 26 November 2025: PCC cell-by-cell assessment begins
  • 1 April 2026: Other administrative changes effective for companies
  • 6 April 2026: Other administrative changes effective for individuals
  • 31 January 2026: File 2024–25 Self Assessment returns
  • 31 October 2025 (or 31 January 2026): File non-resident company returns (SA750)

Where to Find More Information

  • HMRC Helpsheet HS307: Non-resident capital gains (UK land and property)
  • HMRC Helpsheet HS278: Temporary non-residents and CGT (2024–25)
  • SA750 Notes 2024–25: Non-resident company tax returns
  • UK-India Double Taxation Treaty: Article 13 (immovable property)
  • HMRC CGT Manual (CG26500): Detailed technical guidance
Visit www.gov.uk/government/publications for official documents. Consult a qualified UK tax advisor for your specific situation.

Bottom Line

The UK has tightened the screws on non-resident capital gains tax. If you own UK property or hold indirect interests in UK property-rich entities, you cannot avoid UK CGT through offshore structures or non-remittance. File on time, claim DTT relief where applicable, and plan your UK-India tax position carefully. Non-compliance carries steep penalties and long-tail discovery risks. The message from HMRC is clear: transparency and timely reporting are non-negotiable.