By Angelo Chirulli, FCA BFP ADIT TEP IFA CPA (ITA) Master’s Degree in Economics

An illustrative story about an overseas property sale. Thomas and the circumstances described are fictional.

Thomas had found a buyer for his flat in Italy. He had bought it before moving to Britain and had kept it long after his working life had settled in the UK.

His Italian adviser had reviewed the circumstances and confirmed that no Italian tax would arise on the gain. The estate agent was preparing the paperwork. Thomas was already thinking about how to use the proceeds.

He contacted Vectigalis Tax with what seemed a straightforward question: could he transfer the money to his British bank account?

The adviser asked to see the purchase deed, the proposed sale documents and a history of when Thomas had lived in the property.

Thomas had expected the discussion to begin with the bank transfer. It began with the sale.

The Italian answer covered the Italian tax

Thomas had lived in the UK continuously for more than a decade. As a UK tax resident, he was generally within the scope of UK Capital Gains Tax on gains from overseas property.

The Italian advice remained relevant, but the UK calculation had to be considered separately. An exemption in the country where a property is located does not automatically carry across to the UK.

The UK–Italy tax treaty allows Italy to tax gains from Italian immovable property. That does not give Italy an exclusive taxing right or prevent the UK from applying its own rules to a UK resident.

Where qualifying foreign tax is paid on the same gain, credit relief may reduce the UK liability. The credit is generally limited to the lower of that foreign tax and the UK tax on the doubly taxed gain. Where no foreign tax is payable, there is ordinarily no foreign tax credit to set against the UK charge.

Keeping the money abroad would not change this sale

Thomas wondered whether he could avoid a UK liability by leaving the proceeds in Italy.

For his proposed sale, keeping the money overseas would not, by itself, prevent a UK liability. The relevant questions were whether a taxable gain arose and which reliefs applied.

The rules had also changed. The remittance basis was abolished for new income and gains from 6 April 2025. The replacement Foreign Income and Gains regime can provide relief for qualifying foreign gains within a person’s first four tax years of UK residence following at least ten consecutive tax years of non-UK residence.

It requires a claim and involves the loss of certain allowances. Thomas’s long period of continuous UK residence put him outside that window.

Older unremitted income and gains can still require separate analysis for former remittance-basis users. That is a different question from whether leaving the proceeds of a new sale abroad makes its gain exempt.

The old purchase documents still mattered

Thomas had assumed that the UK would tax only the increase in value since he moved to Britain.

There is no general rule that resets the acquisition cost of an overseas property to its market value when its owner becomes UK resident. The original acquisition could therefore remain the starting point, even though it happened many years earlier.

Specific rebasing provisions can apply, including for some former remittance-basis users, but their conditions need to be checked. A valuation at the date of arrival is not a substitute for that analysis.

The adviser therefore needed Thomas’s original deed, purchase price and associated costs. His previous UK tax treatment also mattered.

Some of the most useful documents were still in a box in Italy.

The gain needed to be calculated in sterling

Thomas’s own estimate compared the purchase price and expected sale price in euros.

At Vectigalis Tax, the next step was to build the UK computation. Acquisition costs and disposal proceeds generally have to be translated into sterling at the relevant dates. It is not sufficient to calculate a euro gain and convert that single figure at the sale-date exchange rate.

Currency movements can therefore produce a UK gain even where a property has increased little, or not at all, in its local currency.

The expenditure needed attention too. Qualifying purchase and sale costs, including relevant legal and estate-agent fees, could reduce the gain. Certain capital improvements could also qualify.

Thomas remembered paying substantial amounts towards building works. A bank transfer proved that he had paid something, but did not explain what the work involved.

The adviser needed invoices and descriptions to distinguish qualifying enhancement expenditure from ordinary maintenance, and to establish whether the improvements were still reflected in the property when sold.

Having lived there could make a difference

The flat had been Thomas’s home before he moved to the UK. That history was relevant to Private Residence Relief, which can apply to a home outside the UK.

It did not follow that the entire gain was exempt.

The review needed a chronology of ownership and occupation, including when the flat was genuinely his only or main residence, any letting and any absences that might qualify for relief. The final period of ownership could also be relevant.

For periods from 6 April 2015, additional residence and occupation rules can affect relief for a home in a country where the owner is not tax resident.

Thomas’s later visits to Italy therefore needed to be understood in context. Having once lived in the flat, keeping it available and visiting it occasionally were not enough to establish the relief without examining the dates and circumstances.

Signing could determine the tax year

The agent then sent Thomas a draft preliminary agreement. He expected to receive most of the money several months later.

For UK Capital Gains Tax, the date money reaches the bank does not normally determine the tax year of a disposal.

Where a completed disposal takes place under an unconditional contract, the UK timing rule generally refers back to the date that contract was made. A genuinely conditional contract can produce a different result.

For an overseas transaction, the documents must be understood under the applicable local law. Calling an agreement “preliminary” does not, by itself, settle its UK tax effect.

This made advice before signing useful. A contract and completion falling on opposite sides of 5 April could place the gain in a different UK tax year from the one Thomas expected.

The reporting timetable needed its own answer

Thomas had also heard that property gains must be reported within 60 days.

The UK property reporting regime does not apply to a direct sale of an overseas property. A reportable overseas gain is normally dealt with through Self Assessment.

Under the ordinary Self Assessment timetable, a disposal falling in 2026/27 would have an online filing and payment deadline of 31 January 2028. Someone needing to register for Self Assessment would normally need to notify HMRC by 5 October 2027.

That gave Thomas time to prepare the return. It did not make the tax estimate something to leave until then.

Before committing the proceeds elsewhere, he wanted to know how much to reserve.

What Thomas arranged before the sale

Thomas asked his Italian adviser to confirm the local treatment in writing and explain the legal effect of the proposed agreement. He gathered the historic purchase records, supporting evidence for the works and a clear occupation history.

Those documents allowed the UK review to address the gain, the available reliefs and the reporting position together.

The sale could proceed with a realistic estimate of the money Thomas would retain after tax, and with responsibilities agreed between the advisers in both countries.

Planning to sell a property abroad

If you live in the UK and are considering selling an overseas property, a review before signing can establish the likely UK tax exposure, identify relevant reliefs and clarify the records needed.

At Vectigalis Tax, I advise individuals on UK and international tax matters, including overseas property disposals and UK–Italy tax coordination.

Email angelo@vectigalistax.co.uk with the country concerned, how and when you acquired the property, your UK residence history and the expected sale timetable. This provides a useful starting point for agreeing the scope of an initial consultation.