Capital Gains Tax in the UK: What Returning Expats Need to Know

As the UK tax landscape tightens in 2025, expats eyeing a return, now or in the future, must scrutinise how capital gains tax (CGT) could impact their investments—especially those housed offshore.

For British expatriates contemplating a return to the UK, understanding the nuances of capital gains tax (CGT) has become increasingly important. As the government closes long-standing tax advantages for non-domiciled individuals and reduces allowances, UK expats are being forced to reconsider how to protect global investment portfolios from the UK tax net.

The 2025/26 tax year brings into force a new regime with lower CGT exemptions, revised offshore allowances, and the eventual abolition of the remittance basis. At the heart of many expats’ planning is how to legally defer or mitigate tax on gains accrued overseas—particularly through offshore investment structures such as Personal Portfolio Bonds (PPBs).

Capital Gains Tax in 2025: The New Landscape

UK CGT is payable on the sale of chargeable assets such as shares, property, and cryptoassets. The annual exempt amount—once a generous buffer—has now shrunk to just £3,000 per individual for the 2025/26 tax year. Beyond that threshold, gains are taxed at:

–18% for basic-rate taxpayers

–24% for higher and additional-rate taxpayers

These rates apply to most assets, including UK residential property (since the 2023 Budget reform). Business Asset Disposal Relief may still apply at a reduced 14% for eligible entrepreneurs, but such reliefs are narrowing.

Residency Matters: A Tale of Two Tax Regimes

UK Residents: Taxed on Worldwide Gains

Individuals who are tax-resident in the UK are liable to CGT on their global assets. Residency is determined under the UK’s Statutory Residence Test (SRT), which considers days spent in the UK and personal ties.

Non-Residents: Largely Exempt—But With Conditions

Non-UK residents, by contrast, are generally only liable for CGT on UK real estate and certain UK business interests. Other global disposals—shares, crypto, foreign property—are outside the UK tax net.

However, HMRC imposes a “temporary non-residence” rule: if an individual leaves the UK and realises gains while abroad but returns within five years, those gains can be brought into the UK tax calculation in the year of return. This rule is designed to stop “capital flight” through brief expatriation.

With these rules in mind, timing a return to the UK becomes not just a personal decision but a financial one.

Personal Portfolio Bonds: A Shield for the Globally Mobile

One increasingly popular planning vehicle for mobile investors is the Personal Portfolio Bond (PPB)—an offshore life assurance wrapper that can hold a wide array of assets, including funds, equities, and alternative investments.

How They Work

-While non-resident, an investor can buy and sell assets within the bond free of CGT.

-Upon return to the UK, any gains within the bond are not taxed as capital gains, but rather as income when withdrawals exceed the cumulative tax-free allowance.

-Investors are permitted to withdraw up to 5% of the original investment per annum for 20 years, without immediate tax liability—a powerful tool for tax deferral.

-Crucially, time-apportionment relief is available on full encashment, taxing only the gains attributable to the UK-residency period.

Example:

An expat invests £500,000 into a PPB while living in Singapore. Over five years, the bond grows to £750,000. Upon returning to the UK, the investor delays withdrawals and takes only 5% annually (£25,000). No tax is due immediately. If encashing fully later, only the gains accrued post-return would be taxable—and at income rates, not CGT.

The tax treatment contrasts favourably with direct investment, where switching assets would crystallise gains annually and could be taxed at up to 24% CGT. Properly structured, a PPB can significantly soften the tax impact of repatriation.

The Four-Year Regime: A New Era for Returnees

From April 2025, the UK introduces a flat four-year foreign income and gains (FIG) regime replacing the remittance basis. New arrivals (or returnees who haven’t been UK-resident in the prior 10 years) can benefit from a four-year tax holiday on offshore income and gains—provided they remain offshore.

But after that, their entire global wealth enters the UK tax net. PPBs, again, can play a role: by keeping assets offshore and using the time-apportionment and 5% rules, they provide a bridge between tax-exempt years and long-term planning.

Planning Considerations for UK Expats

For those planning a return, or newly arriving in the UK, the following strategies should be reviewed:

–Crystallise gains before returning to reset asset bases.

–Utilise ISAs and pensions for tax-free growth once back.

–Invest through offshore wrappers like PPBs to defer or mitigate UK taxation.

-Be aware of temporary non-residence rules to avoid “catch-up” taxation on foreign gains.

-Consider business reliefs and spousal allowances to distribute gains tax-efficiently.

Conclusion

Capital gains tax remains one of the most overlooked threats for UK expats planning their return. With exemption thresholds falling and the non-dom regime abolished, relying on outdated assumptions could lead to unexpected tax liabilities.

For the globally mobile and high-net-worth individuals, offshore investment structures such as Personal Portfolio Bonds offer both flexibility and insulation—but must be employed with care and proper timing. Financial planning for expats now requires sharper foresight and a global approach.

If you would like information on any of the above areas or any other area of financial planning, please contact: