Roberto moved from Bari to London in 2015. Like many Italians abroad, he kept a strong connection to his home country. Every summer, he and his family returned to Puglia, where they enjoyed long weeks in a small villa near the coast.
The villa was never his “main residence.” In London, he rented a flat and later bought a house, while the Puglian villa was simply a place for holidays.
By 2024, maintaining two properties had become too expensive. Roberto and his wife decided to sell the villa and reinvest the proceeds in their London home. The sale went smoothly, and in Italy, the gain was taxed modestly at a fixed substitute rate of 26%.
Roberto assumed that paying tax in Italy was the end of the story. But once again, the UK rules came into play.
The UK approach
As a UK resident, Roberto was liable to capital gains tax on his worldwide assets. That included the villa in Puglia.
Here is where the complication arose:
- Private Residence Relief — which exempts a UK main home from CGT — did not apply. The villa was never his main residence under UK law, even if it felt like “home” during holidays.
- UK rates were different — gains on overseas residential property are taxed at 18% or 24%, depending on income.
- Treaty relief was limited — the UK gave credit for the Italian tax already paid, but if UK rates were higher, he had to pay the difference.
After the calculations, Roberto discovered that he owed additional tax in the UK, despite having already paid in Italy.
Why holiday homes are risky
Roberto’s story highlights a frequent misconception:
- “It’s my family home in Italy, so it must be exempt” — not in the UK, unless it was your main residence during your UK residence years.
- Italian substitute tax vs UK calculation — Italy’s fixed rate does not always match the UK’s progressive system.
- Double tax treaty is not a shield — it prevents being taxed twice on the same amount, but if one country taxes at a lower rate, the other may still top it up.
- Holiday homes are rarely covered by reliefs — unlike your UK home, they generally do not qualify for exemptions.
What Roberto could have done
With advance planning, Roberto could have softened the impact:
- Considering a sale earlier — before moving to the UK or before buying his London home, to preserve exemption periods.
- Electing for main residence relief in certain years (possible if carefully planned and declared within deadlines).
- Timing the sale in a tax year when his UK income was lower.
- Coordinating filings to ensure Italian and UK reports aligned properly, avoiding mismatches.
For many Italians abroad, the holiday villa is a treasured asset. But when sold, it creates one of the most common UK tax exposures.
Key lessons:
- Do not assume a holiday home is exempt because it feels like “home.”
- Understand that both Italy and the UK will want to tax the gain, but in different ways.
- Use the double tax treaty, but be aware it only provides partial relief.
- Plan ahead if a sale is on the horizon.
How we help
At Vectigalis Tax, we work with families like Roberto’s to prepare for property sales in Italy while living in the UK. Our aim is to anticipate the UK impact, explain how treaty relief works, and suggest structuring options before contracts are signed.
For Roberto, the sale still provided funds for his London home — but with proper planning, the process could have been less costly and far less stressful.
If you are considering selling a holiday property in Italy while living in the UK, it is essential to look at the transaction through both lenses.
Contact: angelo@vectigalistax.co.uk