The buyer must withhold 15% of your gross US sale price for the IRS. How Form 8288-B cuts it before completion, how the refund works on Form 1040-NR, and how the UK taxes the same gain.
If you live in the UK and sell a property in the United States, the buyer must withhold tax from your proceeds and send it to the IRS — generally 15% of the gross price, not 15% of your profit. That withholding is a deposit, not the tax: your US liability is settled on a Form 1040-NR, and anything over-withheld comes back as a refund, often a year or more later. You can usually cut the withholding to something close to the real tax by applying to the IRS on Form 8288-B — but only if you start before the sale closes.
The Foreign Investment in Real Property Tax Act treats gain on the disposal of a US real property interest by a foreign person as income effectively connected with a US trade or business. That matters, because effectively connected income is "taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents" — so a UK seller is taxed much as an American would be, rather than at a flat 30%.
The collection problem is obvious: once a non-US seller has wired the proceeds abroad, the IRS has little leverage. FIRPTA therefore puts the obligation on the person still standing in the United States — "any person, foreign or domestic, that acquires a U.S. real property interest by purchase, exchange, gift, or any other transfer". A buyer who fails to withhold can be liable for the tax themselves, plus penalties under section 6651 and, for a willful failure to collect and pay over, up to $10,000 under section 7202. In practice their closing agent operates it, which is why FIRPTA is usually raised at the eleventh hour rather than by anyone acting for you.
The IRS says the rate "generally is 15%", applied to the amount realized — "the sum of: (1) cash paid or to be paid (principal only), (2) fair market value of other property transferred, and (3) liability assumed by transferee plus relief". That is a gross figure: a property sold at a loss after costs still attracts 15% withholding unless you act.
Two reductions exist, both driven by what the buyer intends:
| Your situation | Withholding on the amount realized | How to reduce or remove it |
| --- | --- | --- |
| Foreign seller; buyer will not occupy it (investor, company, let second home) | 15% | Form 8288-B before completion |
| Foreign seller; buyer is an individual who will use it as a residence, amount realized $1,000,000 or less | 10% | Buyer's residence declaration; 8288-B can reduce it further |
| Foreign seller; buyer is an individual who will use it as a residence, amount realized $300,000 or less | Nil | Buyer signs the residence declaration; no IRS application |
| Seller is not a foreign person (US citizen or US tax resident) | Nil | Certification of non-foreign status with name, US TIN and address |
| Amount realized is zero, or a Code or treaty non-recognition provision applies | Nil, by notice | Written notice of non-recognition, or a withholding certificate |
The residence conditions are strict and bind the buyer for two years: the property must be used as a residence "for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer", and the buyer must be an individual — one purchasing through an LLC cannot use these exceptions. There is also no taper: at $300,000 the withholding can be nil, and at $300,001 it is 10% of the whole amount.
A withholding certificate brings the withholding down to roughly the tax you will owe. The IRS will issue one where, among other grounds, "the amount that must be withheld would be more than the transferor's maximum tax liability", or where the gain is exempt from US tax.
The application is Form 8288-B, used "to apply for a withholding certificate to reduce or eliminate withholding on dispositions of U.S. real property interests". It requires a real computation: purchase price, improvements, selling costs, and the depreciation you claimed or were allowed to claim while the property was let. If you have been reporting US rental income those figures exist already; if not, resolve that first — our guide to US rental property for UK residents covers it.
Applying does not suspend the withholding. The Form 8288 instructions are explicit: "you must withhold even if an application for a withholding certificate is or has been submitted to the IRS on the date of transfer. However, you do not have to file Form 8288 and transmit the withholding until the 20th day after the day the IRS mails you a copy of the withholding certificate or notice of denial."
So the closing agent holds the full 15% in escrow rather than sending it. If the certificate reduces the withholding to, say, $22,000, the agent remits that and releases the balance; if the IRS denies the application, the full amount goes in. Where no application is pending, Form 8288 and the money are due "by the 20th day after the date of transfer".
Timing is everything: the IRS works to a 90-day target and the application needs TINs for every party. Start when you instruct the agent, not when you accept an offer.
Withholding is a payment on account; the tax is settled on a US nonresident return. The IRS is direct: "the transferor must file a U.S. income tax return and attach the stamped Form 8288–A to receive credit for any tax withheld." That stamped Copy B is the most commonly lost document in a FIRPTA sale.
The gain is computed the American way: sale price, less selling costs, less adjusted basis. Held more than a year, it attracts the long-term rates of 0%, 15% or 20% according to your taxable income.
If the property was ever let, part of the gain is not taxed at long-term rates at all: the IRS states that "the portion of any unrecaptured section 1250 gain from selling section 1250 real property is taxed at a maximum 25% rate". It bites even if you never claimed the depreciation, because the basis adjustment is for depreciation allowed or allowable — which catches sellers who let a US property for years without filing a 1040-NR. One consolation: "Nonresident Aliens (NRAs) are not subject to the Net Investment Income Tax".
Several states operate their own non-resident withholding, with their own rates, forms and returns. It is not part of FIRPTA and a federal certificate does not touch it. Ask the closing agent in writing what the state requires, and budget for a state return too.
Every party needs a US taxpayer identification number. Without one, the IRS warns, "a stamped copy B of Form 8288–A will not be provided to the transferor", leaving you to attach "substantial evidence of withholding" instead — slower, and less certain.
If you have never had a Social Security number, you apply for an ITIN on Form W-7. It normally has to accompany a tax return, but Exception 4 covers "dispositions by a foreign person of U.S. real property interest — third-party withholding" and allows it to be filed with Form 8288, 8288-A or 8288-B instead, under reason code "h. Other". The IRS asks you to "allow 7 weeks for the IRS to notify you of your ITIN application status (9 to 11 weeks if you submit the application during peak processing periods (January 15 through April 30) or if you're filing from overseas)."
Those weeks sit in front of everything else, which is why a seller who starts at completion waits well over a year for a refund. Our guide to getting an ITIN sets out the document requirements.
As a UK resident you are taxed on worldwide gains. GOV.UK puts it plainly: "If you are UK resident, you'll normally pay tax on your foreign income." The sale goes on the foreign pages of your Self Assessment return.
Compute it in sterling, at two different exchange rates. HMRC's Capital Gains Manual requires each leg to be converted at the rate in force on its own date, and rejects the shortcut: "You should not accept a contention that the gain or loss on an asset acquired and disposed of for foreign currency should itself be computed in foreign currency and then converted into sterling." A dollar gain can become a larger sterling gain, or a sterling loss, purely on currency movement.
The rates for 2026-27. GOV.UK gives Capital Gains Tax at 18% on gains within your basic rate band and 24% above it, after a tax-free annual exempt amount of £3,000.
Foreign Tax Credit Relief is capped. HMRC's helpsheet HS263 defines the credit as the lower of "foreign tax paid (or allowed by the DTA) on the income or capital gain" and the "UK tax liability on the income or capital gain", adding that it "can never be more than the UK tax liability". So the credit is measured against your final US tax, not the 15% withheld — and where US tax exceeds UK tax on the same gain, the excess is lost.
The 60-day rule does not apply here. GOV.UK is specific that "you must report and pay any Capital Gains Tax due on UK residential property within 60 days of completing the sale". A US property is not UK property, so it goes in the Self Assessment return instead: reported "by 31 December in the tax year after you made your gain" and paid by 31 January. HMRC's real-time service cannot be used where foreign tax credit relief on overseas property is claimed.
Recent arrivals. You may qualify for the four-year foreign income and gains regime, available in your first four years of UK residence after at least ten consecutive tax years of non-residence. It is not free: a claimant loses the personal allowance and "the CGT annual exempt amount for the tax year in relation to which the claim is made".
FIRPTA does not apply to you — you are not a foreign person — so no withholding is due, provided you give the buyer a certification of non-foreign status. You still have two returns to file.
On the US side, the section 121 exclusion may remove much of the gain: up to $250,000, "or up to $500,000 of that gain if you file a joint return", where you owned and lived in the home for at least 24 months of the last five years and have not excluded a gain on another home in the previous two. Because that look-back is five years, moving to Britain starts a clock. The UK still taxes the gain under its own rules, and the US exclusion creates no UK relief — a mismatch explored in selling your US home after moving to the UK, with the mirror case in selling UK property as a US citizen.
Figures and exchange rates are illustrative. A UK resident who is not a US person sells a Florida rental for $600,000 to an investor, so no residence exception applies.
The lesson is not the totals: $58,500 sat with the IRS for over a year for no reason, and the UK bill fell due on 31 January regardless.
1. Before marketing, gather your purchase closing statement, records of improvements, and every US return showing depreciation. Check whether you hold an SSN or a valid ITIN.
2. On instruction, tell the closing agent the seller is a foreign person, and ask in writing what state withholding applies.
3. Under contract, establish the buyer's intended use — an individual who will occupy it may move you to 10%, or to nil below $300,000.
4. Well before completion, file Form 8288-B with the computation, plus Form W-7 under Exception 4 if you have no US number.
5. At completion, ensure the closing agent holds the withholding in escrow pending the certificate rather than remitting it.
6. After the IRS decides, the agent remits by the 20th day and releases the balance. Obtain the stamped Form 8288-A.
7. The following filing season, file Form 1040-NR with the stamped 8288-A attached, plus any state return, and claim the refund.
8. In the UK, report the gain in sterling in the Self Assessment return for the year of disposal, claiming Foreign Tax Credit Relief against the final US tax.
A FIRPTA sale is not conceptually hard, but it is unforgiving about sequence: the certificate must precede completion, the ITIN must precede the certificate, and the UK return falls due whether or not the American refund has landed. If the gain is meaningful, or the property was ever let, do the modelling before you accept an offer — our cross-border tax calculator is a starting point for the sterling arithmetic, and our US-UK expat tax accountants handle both returns as one exercise, with a licensed CPA or Enrolled Agent signing off the US filings and an ACCA-qualified accountant the UK side. If a sale is in motion, book a consultation early; afterwards the options narrow to waiting for a refund.
This article is general information about the tax rules, not advice on your circumstances.