How US Expats in the UK Can Legally Minimise Capital Gains Tax on Property Sales

Owning property in the United Kingdom has long been a popular choice for American expatriates, both as a home and as an investment. However, selling that property can create complex tax consequences on both sides of the Atlantic. With the right planning, many of these liabilities can be reduced or even avoided altogether. At Xerxes Associates LLP , our dual-qualified team helps US citizens in the UK navigate the intersection between HMRC and IRS rules to ensure property transactions are handled efficiently and compliantly.

For Americans living in Britain, the first step is understanding that both the UK and the US tax capital gains worldwide . This means that when you sell a property in the UK, both HMRC and the IRS may expect a portion of your profit. The UK applies Capital Gains Tax (CGT) based on your period of ownership, while the US taxes the same gain under its global taxation system. Without careful coordination, this can lead to double taxation.

Fortunately, the US-UK Double Taxation Treaty provides relief. When properly applied, it allows taxpayers to offset taxes paid in one country against liabilities in the other, effectively preventing the same income from being taxed twice. The key is timing and documentation. Filing accurate records, establishing the correct basis value, and applying the relevant treaty articles can significantly reduce the overall burden.

In the UK, private residence relief can exempt part or all of the gain if the property was your main home for the majority of ownership. US citizens should note, however, that the IRS does not always recognise the full scope of this relief. The US exclusion on the sale of a primary residence is capped at 250,000 USD for single filers and 500,000 USD for married couples, and additional currency adjustments may apply. As exchange rates fluctuate, Xerxes Associates LLP assists clients in converting values correctly and ensuring both tax returns reflect the same underlying transaction.

For investment or buy-to-let properties, additional strategies can help. Accurate tracking of improvement costs, allowable deductions, and purchase expenses can lower your taxable gain in both jurisdictions. Timing also matters. Selling a property in a tax year when your income is lower may place you in a reduced CGT bracket, saving thousands in potential tax.
Residency status adds another layer of complexity. If you are non-domiciled in the UK and claim the remittance basis, only gains brought into the country may be subject to UK tax. However, the US will still tax the worldwide gain. Aligning these positions through professional advice ensures that you remain compliant without overpaying.

Common mistakes include failing to report the sale to the IRS because the property was located abroad or assuming HMRC’s reliefs automatically apply in the US. With global data-sharing agreements expanding, both authorities now receive cross-border transaction information directly from financial institutions. Late or inconsistent reporting can trigger penalties, so expert coordination is essential.

At Xerxes Associates LLP , our advisers prepare both HMRC and IRS filings side by side, ensuring that exchange rates, treaty claims, and reliefs are applied consistently. This dual-jurisdiction approach helps clients avoid unnecessary duplication while maintaining complete compliance. We also provide proactive planning for those considering a future sale, including advice on ownership structure, timing, and reinvestment strategies that align with both tax regimes.

Capital gains planning is not about avoidance, but optimisation. With the right advice, US expats can meet every legal requirement while retaining more of their profit. Whether you are preparing to sell your UK home or reviewing a property portfolio, professional cross-border guidance is the key to protecting your wealth.

To arrange a confidential consultation with a dual-qualified adviser, visit www.xerxesassociatesllp.com and discover how Xerxes Associates LLP helps US expats in the UK achieve tax efficiency and peace of mind.
If you are a US expat living in London or elsewhere in the UK, get in touch with us to take advantage of the comprehensive, expert tax advice service that Xerxes Associates LLP provides to all our clients.