It’s all foreign to me: CGT and non-sterling assets

Now might be an apposite time to remind ourselves of how Capital Gains Tax (‘CGT’) deals with foreign currency and other non-sterling assets.  It’s worth noting before we start that if you are dealing in such things as a business activity, Income Tax rather than CGT will be relevant and nothing we say below will apply.

The basic rule is that the cost and disposal proceeds of any asset must always be quantified in sterling.  If you bought a property for $500,000 at $1.30 and you sell it for $450,000 at $1.10, you have (for UK CGT purposes) made a capital gain of £24,476, not a capital loss of $50,000.

If you borrowed $400,000 to buy the property and you repaid that debt out of the proceeds of sale, you have made a ‘loss’ on the debt of £55,944.  But (since CGT deals with assets rather than liabilities) you get no tax relief for that loss.

Similarly, if sterling were to appreciate during your period of ownership of an asset denominated in foreign currency and financed by a foreign currency loan, you may find that you have a gain (in foreign currency terms) on the asset but a CGT loss; and a tax-free ‘gain’ (in sterling terms) on repayment of the loan.

Of course, other countries as well as the UK have the impudence to charge tax on capital gains.  Usually, on a disposal of real property, tax will be levied by the country in which the property is located, even if the disposal is made by a non-resident – the UK’s generous disavowal of a charge on non-residents until relatively recently was an exception to the norm.  These countries will, naturally, compute any gain or loss according to their own rules, and by reference to their own currencies.

It’s therefore perfectly possible for the same transaction to give rise to a taxable gain for overseas tax purposes and a loss for UK tax purposes, or vice versa.  Any tax charged by the ‘host’ country is set off against any UK CGT chargeable on the gain: but that’s as far as it goes.  There can be no kind of netting off of a foreign-tax loss against a UK gain on the same transaction, nor of a UK loss against a foreign-tax gain: and where foreign tax is paid on a transaction that gives rise to a loss for UK purposes, no relief will ever be available for that foreign tax.

Gains or losses on foreign currency itself are fairly straightforward. You are not chargeable to UK CGT in respect of gains (nor entitled to relief for losses) on the disposal of:

  • Foreign currency you acquired for your own (or your family’s or dependants’) personal expenditure outside the UK
  • Debts denominated in foreign currency, where you are the original creditor (as distinct from an assignee) unless the debt is a ‘debt on a security’; or
  • Foreign currency bank accounts (though if the account was held before the rules changed in 2012 the position can be more complicated – seek advice)

For this purpose, ‘foreign currency’ does not include cryptoassets, the taxation of which is a whole topic in itself: happily, it is one in which BKL has specialist expertise.

For more information about any of the above tax areas, please get in touch with your usual BKL contact or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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