A UK resident pays UK Income Tax on rent from a property abroad and UK Capital Gains Tax at 18% or 24% (2026/27) when it is sold, because GOV.UK's rule is that if you are UK resident you normally pay tax on your foreign income, and since 6 April 2025 domicile no longer changes that. Both are reported on the Self Assessment return; tax already paid abroad is credited against the UK tax on the same income or gain, never refunded. Correct as at 13 September 2026.
How is foreign rental income taxed on a UK return?
Rent from a property abroad is taxed as the profit of an overseas property business, computed under the same rules as a UK let (PIM4702) and entered on the foreign pages of the return at your ordinary Income Tax rates: 20%, 40% or 45% for 2026/27.
The £1,000 property allowance (2026/27) can be taken instead of expenses, and gross property income of £1,000 or less need not be reported; the allowance is written for any property business, which the Act defines to include an overseas one (ITTOIA 2005 s265 and s783BA). Overseas and UK lets are separate businesses, so a loss on one cannot be set against the other.
The mortgage interest restriction is also written for a property business (s272A), so interest on a loan for the flat abroad gets a 20% credit (2026/27) and no deduction; our Section 24 guide covers the mechanics. From 6 April 2027 property income rates move to 22%, 42% and 47% and the credit to 22% (policy paper); the paper does not say whether overseas property income is included.
How is the foreign tax I already paid credited?
Foreign Tax Credit Relief sets the tax paid abroad against the UK tax on the same income, limited to the lower of the foreign tax properly due under the treaty and the UK tax on that income (HS263). You pay the higher of the two systems in total, and excess foreign tax is not refunded.
A treaty can restrict the creditable amount, and where the treaty says the tax should be reclaimed from the other country there is no UK credit (GOV.UK, if you are taxed twice). In a year with no UK liability, for example a loss year, the foreign tax can instead be deducted from the income.
I moved to the UK recently. Does the 4-year regime cover my flat abroad?
From 6 April 2025 the remittance basis has been abolished, and a qualifying new resident, in one of their first 4 tax years of UK residence after at least 10 consecutive tax years abroad, can claim relief on qualifying foreign income, which HS266 lists as including the profits of an overseas property business. A claim costs the personal allowance and the Capital Gains Tax annual exempt amount for that year, along with the married couple's and transferable allowances, among others (HS266).
What tax do I pay when I sell a property abroad?
A UK resident pays Capital Gains Tax at 18% within the basic rate band and 24% above it (2026/27, GOV.UK) on the sterling gain after the £3,000 annual exempt amount, reported on the Self Assessment return. The 60-day rule is for UK property and does not apply to a sale abroad.
The gain is worked in sterling: the cost is converted at the exchange rate on the purchase date and the proceeds at the rate on the completion date, and HMRC will not accept a gain worked in the foreign currency and converted at the end (CG78310). Foreign tax on the gain is credited under the same lower-of rule.
Private Residence Relief covers the years the home abroad was your only or main home and the last 9 months of ownership, and covers the whole gain only where it was your only or main home throughout (GOV.UK); a nomination must be made within 2 years of the combination of homes changing, and an overseas home can be nominated only for a tax year in which you occupied it for at least 90 days, from 6 April 2015 (GOV.UK). Someone who leaves the UK and returns within 5 years can be taxed on gains made while away.
What is taxed, where it goes on the return, and what relief applies
| What is taxed | Where it goes on the return | Relief that applies (2026/27) |
|---|---|---|
| Rent from the property abroad, net of allowable expenses | Foreign pages of the Self Assessment return (SA106) | £1,000 property allowance instead of expenses; 20% credit on mortgage interest; Foreign Tax Credit Relief for the foreign tax properly due |
| The gain on sale, worked in sterling at the rates on the purchase and completion dates | The foreign section of the Self Assessment return records overseas income or gains; no 60-day return | £3,000 annual exempt amount; 18% or 24%; Private Residence Relief for the period it was the only or main home; Foreign Tax Credit Relief up to the UK tax on the gain |
| Rent never declared in earlier years | Worldwide Disclosure Facility, 90 days from notification | Years counted by behaviour: 4 or 6 ordinarily; 12 for offshore matters, from 2013/14 where the failure was careless and from 2015/16 whether you took reasonable care or were careless; 20 where deliberate; the 12 year limit does not apply where HMRC already had overseas information from which it could reasonably have been expected to spot the lost tax (CH53510); for years from 2017/18 an unprompted careless disclosure can be reduced to a 0% penalty, a prompted one cannot; liabilities uncorrected by 30 September 2018 carry a minimum 100% under Failure to Correct |
| A new arrival in the first 4 years of UK residence | Claim on the Self Assessment return | Relief on overseas property profits and foreign gains, at the cost of the personal allowance and the £3,000 annual exempt amount for that year |
Example
Example. A higher-rate taxpayer lets a flat in Spain through a local agent in 2026/27 and sells it in March 2027, within the same tax year. The sterling figures are assumed, already converted at the rates on the dates.
The rent: £10,000 received, expenses of £2,500 (agent fees, community charges, insurance, repairs), no mortgage. Profit £7,500; UK tax at 40% (2026/27) = £3,000. Spanish tax paid on the same rent, converted, £1,500. Foreign Tax Credit Relief is the lower of £1,500 and £3,000, so £1,500, and the UK tax payable on the letting is £1,500.
Had the Spanish tax been £3,600, the credit would stop at £3,000, no UK tax would be due, and the £600 excess would not be refunded.
The sale: purchase price converted at the rate on the purchase date £150,000; sale price converted at the rate on the completion date £210,000; costs of buying and selling plus improvements £8,000. Gain £52,000, less the £3,000 annual exempt amount (2026/27) = £49,000, all above the basic rate band, at 24% (2026/27) = £11,760. It is reported on the Self Assessment return for 2026/27, due by 31 January 2028, and any Spanish tax on the gain is credited up to £11,760.
A flat that lost value in euros can still show a sterling gain, and the reverse.
What happens if the rent was never declared?
Undeclared rent from a property abroad is an offshore issue, and the route is the Worldwide Disclosure Facility: notify HMRC, then 90 days to compute the tax, the interest and the penalties for each year and submit with payment. HMRC can assess 12 years back for offshore matters, from 2013/14 where the failure was careless and from 2015/16 whether you took reasonable care or were careless, against the ordinary 4 or 6, and 20 years where the loss was deliberate; the 12 year limit does not apply where HMRC already had overseas information from which it could reasonably have been expected to spot the lost tax (CH53510, CH53200).
Each year needs the rent, the expenses, the foreign tax paid and the exchange rates on the dates. The letter matters (what an HMRC nudge letter means): an unprompted disclosure can carry a lower penalty than a prompted one, and for years from 2017/18 a careless unprompted disclosure can be reduced to 0% where a prompted one cannot. Older liabilities that existed at 5 April 2017 and were not corrected by 30 September 2018 sit in the separate Failure to Correct regime, with a standard penalty of 200% of the tax and a minimum of 100%, whatever the behaviour (CC/FS17). The process is in how the Worldwide Disclosure Facility works and on our Worldwide Disclosure Facility service page.
What to do now
You can gather the agent statements, the foreign tax assessments, the purchase deed and the completion statement yourself, list the tax years with rent, check whether gross rent is £1,000 or less, and register by 5 October if this is the first year. Our landlord tax calculator works the letting profit and the Section 24 credit.
The treaty position and the creditable amount, the exchange-rate computation across years, the behaviour self-assessment and year count for a disclosure, the choice between credit and deduction in a loss year, and Private Residence Relief on a home abroad are adviser work. The property also sits in your estate for inheritance tax if you are a long-term UK resident; the rules are in our guide to inheritance tax on foreign assets.
What we do with an overseas property file
We ask first for the letting agent statements or bank credits for the rent, the foreign tax return or assessment showing tax paid abroad, the purchase deed with the price and date, the sale contract where there is a sale, and a list of the tax years the rent was received.
We prepare the foreign pages, compute the profit under UK rules, convert at the rates on the dates, and claim Foreign Tax Credit Relief for the foreign tax properly due under the treaty. On a sale we work the gain in sterling from the acquisition-date and disposal-date figures, apply the £3,000 annual exempt amount (2026/27) and the 18% or 24% rates, and credit the foreign tax on the gain up to the UK tax on it.
Where years are missing we count them by behaviour, prepare the figures for each year and run the disclosure through the Worldwide Disclosure Facility. If the numbers show nothing is owed, for example because the foreign tax paid covers the UK tax or the rent sits under the property allowance, we say so, and if we cannot help we say that too.
Frequently Asked Questions
Owning it is not itself reported; the rent and any gain are. A UK resident with foreign income or capital gains usually needs to fill in a Self Assessment return, and gross property income of £1,000 or less (2026/27) need not be reported. Register by 5 October after the tax year.
HMRC receives data from other tax authorities under international exchange agreements and writes to people whose records suggest foreign income. A letter makes any later disclosure prompted.
There is no separate foreign allowance. The £1,000 property allowance covers gross rent, the £12,570 personal allowance applies to total income including foreign rent, and the £3,000 annual exempt amount covers gains (all 2026/27).
Not for a sale on or after 6 April 2025: the remittance basis has been abolished, so a UK resident is taxed on the gain when it arises, wherever the money sits, and moving the proceeds to a UK account is not a separate taxable event. Anyone who used the remittance basis before 6 April 2025 and is bringing in the proceeds of an earlier sale needs advice on the transitional rules.
Talk to Umer Khan about a property abroad
The first conversation covers where the property is, what it has earned, whether it has been or will be sold, and which years have been declared. Umer Khan, Senior Manager, handles our property tax work. Call 020 8554 2135, email info@visionconsulting.co.uk or use the contact page.
About Vision Consulting. Vision Consulting is a firm of chartered accountants and registered auditors, regulated by ICAEW, with offices in the City of London (the Gherkin, 30 St Mary Axe), the West End (33 Cavendish Square) and Gants Hill, Ilford. The firm provides year-end accounts, bookkeeping, payroll and tax compliance, including Making Tax Digital and VAT, for individuals, landlords, directors and businesses. Its specialist teams provide audit and assurance (company and charity audits and audit-exemption advice), probate and estate administration (the firm is licensed for non-contentious probate), inheritance-tax and estate planning, HMRC tax investigations and voluntary disclosures, property and landlord taxation, and corporation-tax and company advisory.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances. Speak to us before acting on anything here.