A UK resident who sells a property abroad is liable to UK capital gains tax on the gain, worked out in sterling by converting the cost at the exchange rate when it was paid and the proceeds at the rate when the sale took place. Tax paid in the country where the property is can usually be credited against the UK tax on the same gain, up to the amount of that UK tax. The gain goes on the SA108 capital gains pages and the credit is claimed on the SA106 foreign pages; no 60 day return is needed because that regime only covers UK property.

Why does the UK tax a gain on a property abroad?

GOV.UK says you may have to pay capital gains tax even if your asset is overseas. Section 21(1) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) treats all forms of property as assets, whether situated in the UK or not. Whether you are UK resident is decided by the statutory residence test.

The country where the property is will usually tax the gain too. HMRC helpsheet HS261 explains that under most double taxation agreements, gains other than those on real property, or on a permanent establishment, are taxable only where the seller is resident. Real property is the exception, so the overseas country normally keeps the right to tax and the UK gives credit for its tax.

Does the four year FIG regime change this?

The SA108 notes for 2025 to 2026 explain that the foreign income and gains (FIG) regime replaced the previous rules for non domiciled individuals, including the remittance basis. A qualifying new resident, meaning someone in one of their first 4 years of UK residence after at least 10 consecutive tax years of non residence, can claim relief from UK tax on foreign gains on the SA109 pages. If you claim, you cannot also claim foreign tax credit relief on the same gain, and a loss on a foreign asset in that year is not allowable and cannot be carried forward. GOV.UK adds that a FIG claim also costs you the annual exempt amount for that year. See the four year FIG regime.

How are foreign currency amounts converted?

HMRC’s Capital Gains Manual at CG78310 says each foreign currency amount is converted into sterling at the time it is paid or received. The cost is converted at the exchange rate at the date of acquisition and the proceeds at the rate at the date of disposal. HMRC will not accept a gain computed in the foreign currency and converted at the disposal rate, citing Bentley v Pike and Capcount Trading v Evans. HMRC does not prescribe an exchange rate source, but expects a reasonable and consistent method.

The result is that currency movements form part of the taxable gain or loss. A property can show a gain in euros and a loss in sterling, or the reverse. Purchase costs, improvement spending and selling costs are each converted at the rate on the date they were incurred.

A mortgage in the local currency is a separate matter. CG78335 explains that the loan is a liability, not an asset, so an exchange loss on the loan itself is not allowable, although using foreign currency to repay it can produce gains or losses on that currency. See foreign currency and capital gains.

Worked example: selling a villa in euros

Illustration only. Chris, a UK resident higher rate taxpayer with no other gains, bought a holiday villa for €200,000 plus €10,000 of purchase costs when €1 was worth £0.85. Chris sells it in 2026 to 2027 for €260,000 with €6,000 of selling costs, when €1 is worth £0.86. The overseas country charges tax equal to £6,000.

Step Working Amount
Proceeds €260,000 at 0.86 £223,600
Selling costs €6,000 at 0.86 £5,160
Purchase price €200,000 at 0.85 £170,000
Purchase costs €10,000 at 0.85 £8,500
Gain £39,940
Less annual exempt amount £3,000
UK tax at 24% £36,940 x 24% £8,865.60
Foreign tax credit Lower of £6,000 and £8,865.60 £6,000
UK tax payable £2,865.60

Computing the gain in euros (€44,000) and converting at 0.86 would give £37,840, which is the method CG78310 rejects. GOV.UK confirms the annual exempt amount is £3,000 and the higher rate is 24% for 2026 to 2027.

How does foreign tax credit relief stop double tax?

Credit is given either under a double taxation agreement or, where there is none, unilaterally. Section 9(2) of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) allows credit against capital gains tax for tax paid under the law of the territory, calculated by reference to a capital gain accruing there, that corresponds to UK capital gains tax. Section 9(6) says a tax can correspond even if it is levied by a province, state or municipality.

HS261 sets out the working rules:

  • The credit cannot exceed the lower of the foreign tax charged on the gain and the UK tax on that gain.
  • Credit is calculated separately for each gain, and excess foreign tax on one gain cannot be set against UK tax on another.
  • Foreign tax above the UK tax is neither repaid nor deductible from the gain.
  • Losses and the annual exempt amount can be allocated in the way that gives the most relief.

If the foreign tax in the example had been £10,000, the credit would stop at £8,865.60 and the other £1,134.40 would be lost.

Where no credit is useful, for example because the disposal produces a UK loss, section 113 of TIOPA 2010 allows foreign tax charged on the disposal to be deducted in calculating the gain instead. HS261 notes this is usually only worthwhile where there is no UK tax to credit against. The credit must be claimed by the fourth anniversary of the end of the tax year or, if later, 31 January after the tax year in which the foreign tax was paid (TIOPA 2010 section 19). The general rules are in foreign tax credit relief.

Can private residence relief cover a home abroad?

HMRC helpsheet HS283 says that if your home is outside the UK you may still qualify. Since 2015 to 2016, however, section 222B TCGA 1992 treats a home as not occupied as a residence in any tax year in which neither you nor your spouse or civil partner was resident in the country where it is, and you did not meet the day count test. Section 222C says the test is met if you spend at least 90 days in the year in qualifying houses there, with a proportionate figure for part years. A UK resident with a holiday home they visit for a few weeks a year will usually fail it. See choosing a main residence.

How and when is the sale reported?

  • No 60 day return. The 60 day reporting rule in Schedule 2 to the Finance Act 2019 applies to residential property in the United Kingdom, so an overseas sale by a UK resident is reported through Self Assessment.
  • SA108. The gain is entered on the capital gains summary pages with a computation attached; see completing the SA108.
  • SA106. The SA106 notes say that to claim credit you fill in box 33 (the chargeable gain under UK rules) and boxes 37 to 40, putting an X in box 38 and the relief in box 39, in UK pounds. Gains in box 33 must also be on the SA108.
  • Not the real time service. GOV.UK says the real time capital gains tax service cannot be used to report foreign tax credit relief for overseas property.

Any capital gains tax left after the credit is part of the Self Assessment balancing payment, which section 59B(4) of the Taxes Management Act 1970 makes due by 31 January following the tax year: 31 January 2028 for a sale in 2026 to 2027.

What are the common mistakes?

  • Working out the gain in the foreign currency and converting the result.
  • Assuming tax paid abroad settles the matter, when UK tax may still be due on top.
  • Trying to use surplus foreign tax on one property against UK tax on another gain.
  • Claiming private residence relief on a holiday home without checking the 90 day test.
  • Claiming both the FIG regime and foreign tax credit relief on the same gain.
  • Filing a 60 day UK property return for an overseas sale, or using the real time service when a credit is needed.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.