Silvia’s parents wanted to help her. In 2010, while she was still living in Florence, they transferred to her a small apartment as a donation, a common practice in Italy. At the time, no money changed hands — it was simply a way of moving family assets to the next generation.

For years, Silvia rented out the apartment to students. When she later moved to London for work, she kept the property as a safety net, thinking one day she might return.

By 2024, Silvia had no intention of going back. The apartment needed repairs, managing it from abroad was complicated, and the London property market looked far more attractive for investment. She decided to sell.

Her Italian notary reassured her:

“Since you received the property as a gift, we calculate the gain based on the original family cost, but because of indexation and exemptions, your liability here is minimal. Italy will not ask much, if anything.” Silvia was relieved. She wired the proceeds to her UK account and thought the chapter was closed. A few months later, as her UK tax return was being prepared, she discovered that the story was not so simple.

The UK perspective

Under UK rules, residents are taxed on their worldwide capital gains. That includes properties sold in Italy, regardless of how they were acquired.

The key difference lies in how the acquisition cost is measured. In Italy, a gift often carries the donor’s historical cost base. In the UK, however, the rules assume that when you receive an asset as a gift, you are treated as acquiring it at the market value on the date of transfer.

In Silvia’s case, this meant:

• Her “purchase price” for UK purposes was the 2010 market value of the apartment (in sterling, using the exchange rate of that year).
• Her “sale price” was the 2024 amount, again converted into sterling.
• The difference was substantial, even though her parents had originally bought the apartment decades earlier at a much lower cost.

Because the UK calculation did not align with the Italian one, Silvia ended up with a significant taxable gain in the UK — even though Italy itself had demanded almost nothing.

Why this situation is common

Silvia’s case highlights several traps for Italians in the UK:

1. Different cost bases – Gifts are valued differently in Italy and the UK, leading to mismatched calculations.
2. Currency effects – Sterling conversion can turn a small Italian gain into a large UK one.
3. Reliefs are not portable – Italian reliefs (such as exemptions for long-term ownership) do not automatically apply in the UK.
4. The double tax treaty has limits – Where Italy charges little or nothing, the treaty offers no credit, leaving the UK free to tax the entire gain.

What Silvia could have done

Had Silvia taken advice before the sale, her position could have been managed more efficiently. For example:

• Reviewing the UK base cost in advance would have clarified the expected gain and allowed her to plan cash flow.
• Considering the timing of the sale in a year with lower UK income could have reduced the tax rate.
• Exploring family ownership structures before selling might have spread the gain across multiple taxpayers, each benefiting from allowances.
• Coordinating Italian and UK reporting would have avoided last-minute surprises.

Silvia’s experience shows how easy it is to assume that a “family gift” is tax-free. In one country, it may be. But in another, it creates a tax exposure you did not expect.

For Italians living in the UK, the key lessons are:

• Always establish what your UK acquisition cost is, especially if you received the property through inheritance or gift.
• Check whether Italy and the UK apply the same valuation rules — they often do not.
• Plan early. Once the sale is complete, your options are limited.

How we help

At Vectigalis Tax, we work with families who hold property in both Italy and the UK. Our role is to bridge the two systems, so that when an apartment or villa is sold, the tax implications are known in advance.

For Silvia, the real stress was not the tax bill itself, but the surprise. With forward planning, the sale could have been structured to make the outcome much smoother.

If you are considering selling a property in Italy that was gifted or inherited, take advice before you sign. What looks simple in Florence or Milan may look very different in London.

Speak to us in confidence: angelo@vectigalistax.co.uk