A capital gains tax treaty, usually part of a wider double tax treaty, decides which country can tax a gain when two countries both have a claim to it. For UK land and property, almost every UK treaty lets the UK tax the gain, and your country of residence then gives you a credit for the UK tax paid. For most other assets, such as ordinary shares, the gain is usually taxed only where you live.
The UK has one of the largest treaty networks in the world, with agreements covering more than 130 countries. You can look up your country on GOV.UK’s list of UK tax treaties.
This guide explains how a double tax treaty works for capital gains tax, which gains each country can tax, how credit relief is calculated, and what a treaty does not change.
How a Capital Gains Tax Treaty Works
Most UK treaties follow the OECD model, which deals with gains in the article usually headed “Capital Gains”. The typical pattern is:
| Type of gain | Who can tax it |
|---|---|
| Land and buildings | The country where the property is, plus the country of residence with a credit |
| Shares in property-rich companies | Often the country where the property is, under newer treaties |
| Assets of a business branch | The country where the branch is |
| Ships and aircraft in international traffic | The country where the business is managed or resident |
| Other assets, such as listed shares | Usually only the country of residence |
Every treaty is different, so always check the wording of the treaty with your country. Older treaties may not include the property-rich shares rule.
Is There Double Taxation on Capital Gains?
It can happen without relief. For example, a non-resident selling a UK flat is taxed in the UK under the non-resident CGT rules, and their home country may also tax worldwide gains. A treaty, or the home country’s own rules, removes the double charge in one of two ways:
- Credit method: the home country taxes the gain but deducts the UK tax already paid. This is the most common.
- Exemption method: the home country exempts the gain, sometimes taking it into account to set the rate on other income.
Credit is normally limited to the lower of the UK tax and the home country’s tax on the same gain.
Worked Example: Credit Relief Under a Treaty
Sofia lives abroad in a country that taxes residents’ worldwide gains at 20%. She sells a UK flat in 2026/27 with a gain of £60,000 for both countries’ purposes. She has no other UK income.
| Step | Amount |
|---|---|
| UK taxable gain (£60,000 less £3,000 exemption) | £57,000 |
| UK CGT: £37,700 at 18% + £19,300 at 24% | £11,418 |
| Home country tax at 20% on £60,000 | £12,000 |
| Less credit for UK tax | (£11,418) |
| Home country tax still payable | £582 |
| Total tax on the gain | £12,000 |
Sofia pays the UK first, within 60 days of completion, then claims credit in her home country. In practice, exchange rates, different tax years and local allowances can change the figures.
How to Claim Relief Under a Capital Gains Tax Treaty
- Pay the UK tax first where the UK has the first right to tax, such as on UK property, and keep the HMRC payment confirmation.
- Convert the gain and the UK tax into your local currency using the rate your home country requires.
- Report the gain on your home country’s return for the year it falls into under local rules.
- Claim the foreign tax credit or exemption the treaty gives, attaching proof of the UK tax where required.
- Check time limits. Most countries only allow credit claims within a few years of the tax year.
If you are UK resident and paying tax abroad on a foreign gain, the process works the other way round: you claim Foreign Tax Credit Relief on your UK Self Assessment return.
What a Treaty Does Not Change
- The UK 60-day return. You must still report a UK property sale within 60 days. See the non-resident CGT 60 day rule and HMRC’s guide to telling HMRC about CGT on UK property if you’re not a UK resident.
- Temporary non-residence. Most treaties do not stop the UK taxing gains when you return within five years. See temporary non-residence CGT.
- UK tax on property-rich shares. The UK may still tax these under domestic law, subject to the treaty. See non-residents CGT on shares.
Dual Residents and Treaty Tie-Breakers
If both the UK and another country treat you as resident, the treaty’s residence article uses tie-breaker tests, usually your permanent home, then your centre of vital interests, habitual abode and nationality. The country that wins is treated as your residence for treaty purposes. GOV.UK explains how to claim relief if you’re taxed twice.
Frequently Asked Questions
Which countries does the UK have a double tax treaty with?
More than 130, including the USA, Canada, Australia, most of Europe, India, the UAE and many others. GOV.UK publishes each treaty by country.
How does a double taxation treaty work?
It allocates taxing rights between two countries and requires the country of residence to give relief, usually a credit for tax paid in the other country.
Is there double taxation on capital gains?
Not usually, if a treaty or the home country’s own rules give credit relief. Without relief, the same gain could be taxed twice.
What is the 5-year rule for Capital Gains Tax in the UK?
It is the temporary non-residence rule. If you leave the UK and return within five years, certain gains made while abroad can be taxed in the UK in the year you return.
Does a treaty stop me paying UK CGT on UK property?
No. Treaties almost always let the UK tax gains on UK land and property. The relief is given by your country of residence.
Get expert help: If you are searching for a capital gains tax accountant near me, our team works with clients across the UK by phone and video. Our non-resident CGT service and wider capital gains tax services are designed for situations like this one.
Conclusion
A capital gains tax treaty usually lets the UK tax gains on UK property, while your country of residence gives credit for the UK tax. Gains on most other assets, such as listed shares, are normally taxed only where you live. A treaty never removes the need to file the UK 60-day return.
Check the exact treaty with your country, keep proof of the UK tax paid, and claim credit in your home country’s return.
For help with UK gains and double tax relief, speak to our non-resident CGT specialists or our tax planning team. Call us on +44 (0)1204 859315 or send us your question for a free initial consultation and a fixed-fee quote within 24 hours.
