If you leave the UK and come back within five years, gains you made while abroad on assets you already owned when you left are taxed as if they arose in the period you return. The rule applies only if you had sole UK residence for at least 4 of the 7 tax years before the year you left. Losses on the same assets become allowable in the same way, and a double tax treaty does not stop the charge.

Why do the rules exist?

A UK resident individual is normally charged capital gains tax on worldwide gains, and a non resident is generally outside the charge except on UK property and assets of a UK branch. Without an anti avoidance rule, someone could leave for a single tax year, sell assets standing at a large gain, and come straight back. Section 1M of the Taxation of Chargeable Gains Act 1992 blocks this by moving the gain to the period of return. The definitions are in Part 4 of Schedule 45 to the Finance Act 2013, the statutory residence test legislation. Before the 2019 rewrite of the charging provisions, the rule was in section 10A, and HMRC’s Capital Gains Manual from CG26500 still uses that reference.

Who counts as temporarily non resident?

Paragraph 110 of Schedule 45 sets four conditions. You are temporarily non resident if:

  1. you had sole UK residence for a residence period (called period A);
  2. immediately after period A, there are one or more residence periods for which you do not have sole UK residence;
  3. at least 4 of the 7 tax years immediately before the year of departure were tax years of sole UK residence, or split years that included a period of sole UK residence; and
  4. the temporary period of non residence is 5 years or less.

The key terms are defined in the same Schedule:

Residence period
A tax year that is not a split year, or the UK part or overseas part of a split year (paragraph 111).
Sole UK residence
Being UK resident with no time in the year, or the UK part of a split year, when you are treated as resident elsewhere under a double tax treaty (paragraph 112).
Temporary period of non residence
The time between the end of period A and the start of the next residence period of sole UK residence (paragraph 113).
Period of return
The first residence period after period A in which you have sole UK residence again (paragraph 115).

Two practical points follow. First, the five years is measured as an actual period between dates, so split year treatment at either end shortens or lengthens it. Second, a year when you were UK resident under domestic law but treaty resident elsewhere is not sole UK residence and counts as part of the absence (HS278, section 4).

Which gains and losses are caught?

Section 1M(1) treats a gain or loss accruing in the temporary period of non residence as accruing in the period of return. The main target is assets you owned before you left. Section 1N excludes assets acquired during the absence, so buying and selling shares while abroad is generally outside the rule. That exclusion does not apply where the new asset carries a link to your time in the UK, including where:

  • your spouse or civil partner acquired it while UK resident and passed it to you under the no gain, no loss rule;
  • its cost was reduced by a rollover relief, such as business asset rollover or insurance replacement relief, given on a disposal of an asset acquired while you were UK resident;
  • a gain on an older asset held before you left was deferred into it, for example a gain held over against a depreciating asset or carried into qualifying corporate bonds on a takeover, and that gain crystallises while you are away.

Gains of closely controlled non resident companies and of settlor interested non resident trusts that would have been attributed to you if you had been UK resident are also brought into the period of return (HS278, section 6). Section 1M(5) confirms that gains already chargeable without the rule, such as non resident gains on UK property, are not taxed twice.

How does it interact with the non resident property charge?

A non resident selling UK property pays tax on the gain since the rebasing date, 5 April 2015 for homes or 5 April 2019 for other property, as explained in our guide to non resident CGT on UK property. If you are temporarily non resident, HS307 explains that the part of the overall gain outside the non resident charge, typically the growth before the rebasing date, is likely to be taxed under these rules when you return. If the rules do not apply, there is no further UK charge.

Worked example

Illustration only. Priya lived in the UK all her life. She left for a job in Singapore on 1 August 2022, with split year treatment for 2022 to 2023. While abroad she:

  • sold shares she had held since 2015 in March 2024, making a gain of £80,000; and
  • bought shares in 2023 and sold them in 2025, making a gain of £15,000.

She returns on 1 June 2026, again with split year treatment. Her temporary period of non residence runs from 1 August 2022 to 1 June 2026, under 4 years, and she had sole UK residence for all 7 years before departure. The £80,000 gain is treated as accruing in the UK part of 2026 to 2027 and goes on that year’s return, using that year’s rates and annual exempt amount. The £15,000 gain is excluded because those shares were bought during the absence. Had her absence lasted more than five years, neither gain would be taxed in the UK.

What about tax paid abroad and the end of the remittance basis?

Section 1M(4) says nothing in any double taxation arrangements prevents the charge. If the other country also taxed the gain, foreign tax credit relief may be available, and HMRC helpsheet HS263 explains how to claim.

HS278 notes that the remittance basis cannot be claimed from 6 April 2025. A returning individual who would previously have kept a gain offshore is now chargeable in the year of return whether or not the money comes to the UK. Gains remitted during the absence that accrued in earlier remittance basis years are treated as remitted in the year of return, and in the years when it is available they can be designated under the temporary repatriation facility.

Does income get the same treatment?

Yes, for some types. HS278 lists income received during the absence that is taxed in the year of return, including flexible drawdown pension withdrawals, certain lump sums, distributions from close companies in which you are a material participator (other than dividends paid out of trade profits arising during the absence), loans to participators released or written off while you were away, and gains on life insurance policies, which get time apportionment for the period abroad. Taking a large dividend from your own company while abroad, then returning within five years, is a classic trap.

Common mistakes

  • Counting tax years instead of the actual period. The five years run from the end of period A to the start of the next sole UK residence period.
  • Forgetting the 4 out of 7 year test. Someone with a shorter UK history before leaving may be outside the rules altogether.
  • Assuming a treaty protects the gain. Section 1M(4) overrides treaties for this charge.
  • Selling assets acquired abroad that carry a rolled over gain from a UK asset, which brings them back within the rule.
  • Not keeping records of acquisition dates and costs while abroad. The return for the year you come back must show the gains and support any claim that assets were acquired during the absence. Errors here can lead to a discovery assessment later.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.