Non-dom capital gains tax comes into effect

Non-domiciled UK residents will be liable for capital gains tax on the sale of their properties for the first time in Britain.

The new tax for non-doms was announced in the 2014 budget and took effect with the start of new tax year (6 April).

The change is expected to cool surging house prices in London and the South East and brings the UK in line with many European countries which have similar rules in place.

Lucy Brennan, a partner at accountancy firm Saffery Champness, commented on the potential effects the tax could have on house prices.

'The UK - London and the South East specifically - have rapidly become one of the world's great hot spots for property investment, particularly amongst high-net worth individuals from around the globe.'

She continued: 'The dramatic increase in costs for non-doms looking to sell significantly changes the calculus involved for such individuals, and it is entirely possible that this change may pour a bit of proverbial cold water on what has remained a very hot and fast-moving market.'

The tax will apply to residential properties which have the which are used for dwellings, or have the potential to be used for dwellings.

At present the tax will apply to properties sold for £500,000 to £2m.

However depending on how this works in practice, the government did add that it 'is minded to extend CGT to all UK residential property… including those calues at £500,000.'

Brennan added: 'This new tax could prove to be a deterrent, perhaps intentional, for high-net worths who may be considering a new or additional house purchase in the UK.

'It will be interesting to see what the impact might be, and whether some individuals now choose to put their money elsewhere.'

Binyamin Ali is assistant editor of Private Client Adviser