Selling Your US Home After Moving to the UK: Exclusion, CGT and Timing

Selling your US home after moving to the UK can be tax-free in America and still taxable in Britain. The US exclusion for gain on a main home depends on how long you owned and lived in the property within the five years before the sale, so the clock starts running the day you move out. Once you are UK resident, HMRC taxes your worldwide gains, and UK relief for a home you no longer live in is often only partial. The date you sell, measured against the date you moved, usually decides the bill.

Key takeaways

• The US exclusion is time-limited. The IRS allows up to $250,000 of gain to be excluded, or $500,000 on a joint return, if you owned and lived in the home for at least 24 months of the five years before the sale. Wait too long after moving and the full exclusion is lost.
• The UK taxes the same gain on its own terms. A UK resident pays tax on UK and foreign gains, and private residence relief is apportioned by time, so years owned after leaving can leave part of the gain exposed.
• The mismatch is the trap. Where the US exclusion removes the American tax, there is no US tax for the UK to credit. The UK charge stands on its own.
• Non-citizens face FIRPTA withholding. When a foreign person sells US property, the buyer generally must withhold 15% and send it to the IRS, whatever the eventual tax turns out to be.
• Sterling decides the UK number. HMRC measures the gain in pounds at the exchange rates on the purchase and sale dates, which can produce a very different figure from the dollar gain.

The US home-sale exclusion, and why the clock starts when you leave

IRS Publication 523 sets two tests: you must have owned the home for at least 24 months out of the five years leading up to the date of sale, and used it as your residence for at least 24 months of those same five years. The months need not be continuous, and a vacation or other short absence still counts as time lived there. Pass both and, per IRS Topic 701, you may exclude up to $250,000 of gain, or $500,000 on a joint return, provided you have not excluded gain on another home in the two years before the sale.

The five-year window is measured backwards from the closing date, not from the date you moved, so it slides forward every day you keep the property. If you lived in the home continuously for at least two years right up to your move, you have up to three years from moving out to close. After that, the full exclusion falls away and the whole gain can be taxable in the US.

Publication 523 does allow a reduced exclusion where you fail the full test because of a qualifying work-related move, such as a new job at least 50 miles farther from the home than your old one. A transfer to London will usually meet that distance, but the reduced figure is proportionate, not a substitute for the full exclusion.

Two further points matter if you kept the property after leaving. Depreciation is never excluded: if you let the home, the gain equal to depreciation allowed or allowable after May 6, 1997 must be recaptured under section 1250, even if you never claimed it. And reporting still applies: the sale goes on Form 8949 and Schedule D where required, certainly where the closing agent issues a Form 1099-S.

Citizens, green card holders and everyone else: FIRPTA

A US citizen living in London remains taxed on worldwide income and gains: the sale goes on Form 1040, the exclusion is claimed there, and any gain above it is taxed in the usual way. A green card holder is generally in the same position while the card is held; ending that status is a separate question, never to be improvised around a sale.

A seller who is neither, such as a British national who lived in the US on a work visa and has since come home, is a foreign person for US purposes, and the sale falls within the Foreign Investment in Real Property Tax Act (FIRPTA). The buyer is usually the withholding agent and must generally withhold 15% of the amount realised (broadly, the sale price rather than the gain) and remit it to the IRS on Forms 8288 and 8288-A. No withholding is required where the buyer acquires the property as a residence and the amount realised is $300,000 or less, and a reduced rate can apply to residences sold for up to $1,000,000.

Withholding is not the tax; it is a payment on account, recovered on a US nonresident return (Form 1040-NR) that reports the actual gain. Where the real liability will be far lower, or nil, the seller can apply on Form 8288-B for a withholding certificate, which the IRS issues where withholding would exceed the maximum tax liability or all of the gain is exempt. It generally acts within 90 days of a complete application, so apply well before closing.

The UK side: worldwide gains and partial private residence relief

Once you are UK resident, GOV.UK is plain: UK residents have to pay tax on their UK and foreign gains. A house in Connecticut or California is a foreign asset, reported on the capital gains pages of your Self Assessment return.

UK private residence relief can apply to a home outside the UK, as HMRC's HS283 helpsheet confirms, but it works very differently from the US exclusion:

• It is apportioned by time. The gain is multiplied by the period you occupied the home as your only or main residence, divided by your whole period of ownership. The final nine months of ownership always qualify, provided the home was your main residence at some point.
• The months after you moved usually count against you. Once you live in a UK home, the US house is normally no longer your main residence, and every month held beyond the final-period allowance enlarges the unrelieved gain.
• A home where you are not tax resident faces an extra test. Since April 2015, such a residence cannot count for a tax year unless you spend at least 90 days there, counted by overnight stays; HMRC explains the day-count rule. Whether a US citizen counts as US tax resident for this purpose is a technical point for your adviser.
• Letting relief rarely helps. It applies only where part of the home was let while you lived in another part, not to letting the whole house after you left.
• Absence relief usually needs a return. It generally requires the home to have been your main residence both before and after the absence, which a permanent move rarely satisfies.

So a home fully covered by the US exclusion can still carry a slice of UK-taxable gain.

Double tax relief under the treaty, and the mismatch

Under Article 13 of the US–UK income tax treaty, gains from real property may be taxed in the country where the property sits. The US therefore has the first right to tax the gain on your American home, and Article 24 requires the UK to allow US tax on US-source gains as a credit against UK tax on the same gain. HMRC's HS263 helpsheet limits the credit to the lower of the foreign tax and the UK tax on that gain, worked out gain by gain; excess foreign tax on one disposal cannot be set against UK tax on another.

That works when both countries tax the gain, but breaks down in the most common case.

Where the US exclusion covers the gain, there is no US tax, so there is nothing for the UK to credit. The UK then taxes whatever part of the gain its own private residence relief does not reach, at ordinary UK rates. The exclusion shifts the tax to Britain rather than removing it.

The reverse also happens: a gain above the US limit, or depreciation recapture on a let home, produces US tax that the UK should credit against its own charge on the same gain. Credits that cannot be used in the year may sometimes be carried; see our guide to foreign tax credit carryovers.

Exchange rates can create a gain that does not exist in dollars

HMRC does not simply convert a dollar gain. Its Capital Gains Manual converts the cost to sterling at the exchange rate on the purchase date and the proceeds at the rate on the sale date. If the pound has weakened since you bought, the sterling gain can be substantially larger than the dollar gain; a modest dollar gain, or even a dollar loss, can become a taxable sterling gain. The opposite holds if sterling has strengthened.

The US computes the same gain in dollars. Two correct calculations, two different numbers, and neither country adjusts for the other.

If you let the home after moving

Many people let the US house for a few years while waiting for a better market. The rental income is then taxable in both countries each year (see our guide to US rental property for UK residents), the exclusion window keeps sliding, and the depreciation you were entitled to claim is recaptured in the US on sale. The UK has no equivalent recapture on residential property, so that slice of US tax should generally be creditable against UK tax on the same gain.

Timing: the single biggest lever

Because each rule is measured from a different date, the sale date relative to the move date matters more than almost anything else.

• Selling before you become UK resident keeps the gain outside UK tax. Where you arrive part-way through a tax year and qualify for split-year treatment, capital gains tax normally applies only to gains in the UK part of the year, so a sale in the overseas part can fall outside it. See HMRC's split-year rules and our guide to the moving-year US–UK tax return.
• Newcomers may be able to claim the 4-year foreign income and gains regime. From 6 April 2025, people in their first four years of UK tax residence, after at least ten consecutive years of non-residence, can claim relief on foreign gains through Self Assessment (HMRC eligibility guidance). A claim forfeits that year's Income Tax and Capital Gains Tax allowances, so model it first.
• Selling inside the US window protects the exclusion.
• Every month held after the move reduces the UK relief fraction and may bring the 90-day test into play.
• Currency moves change the sterling gain; the rate on the disposal date is part of the decision.

For an American newcomer who qualifies for the FIG regime and sells inside the US window, the gain may be sheltered on both sides. For an American ten years into London life selling a long-vacated house, the result can be a UK charge on most of the gain with no US tax to credit.

The calm version of this

None of this means selling the week you land. It means deciding deliberately with both sets of numbers in front of you: the US exclusion on each possible closing date, the UK relief fraction, the sterling gain, and whether a FIRPTA certificate or FIG claim changes the cash position. For the opposite journey, see our guide to selling UK property as a US citizen.

At Next Tax Source this is standard private-client work for a US–UK expat tax accountant: we model the sale in both currencies and under both systems before a contract is signed, and a licensed CPA or Enrolled Agent reviews and signs off every return that leaves the firm. If you are considering selling a US home from the UK, book a confidential consultation.

This article is general information, not tax advice, and does not create a professional relationship. Exclusion limits, withholding rules, reliefs and residence tests change, and the treatment of a particular sale depends on your own facts; confirm the current position with a licensed professional before acting.

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Reviewed by a CPA / Enrolled Agent. Last updated: 10 September 2026.

Official sources: IRS — Topic no. 701, Sale of your home | IRS — Publication 523, Selling Your Home | IRS — FIRPTA withholding | IRS — FIRPTA withholding certificates | IRS — United Kingdom tax treaty documents | GOV.UK — Tax when you sell your home | GOV.UK — HS283 Private Residence Relief (2026) | GOV.UK — Tax on foreign income: UK residence | GOV.UK — HS263 Relief for foreign tax paid (2026) | GOV.UK — 4-year foreign income and gains regime