US-UK Treaty Capital Gains: Article 13 Explained for Americans and Britons

Under US-UK treaty capital gains rules in Article 13, gains on land and property can be taxed in the country where the property sits. Most other gains, including gains on shares, are taxable only where the seller is resident. However, the saving clause lets the US tax its citizens anyway, and a six-year rule lets either country tax former residents.

Article 13 of the 2001 UK-US Double Taxation Convention decides who gets the first right to tax a gain; Article 24 decides who gives the credit. Getting that order wrong is how one gain ends up taxed twice. This guide works through Article 13 with the scenarios we see most often.

What Article 13 of the US-UK treaty covers

Article 13 is the "Gains" article of the treaty. It has six paragraphs, published in full on GOV.UK's copy of the 2001 convention as amended by the 2002 protocol. Each paragraph covers a different type of asset or a special situation.

US-UK treaty capital gains: the six paragraphs at a glance

Why "may be taxed" matters for US-UK treaty capital gains

"May be taxed" in paragraph 1 means the property country gains a right to tax while the residence country keeps its own. "Shall be taxable only" in paragraphs 4 and 5 means the other country gives up its right. Therefore, property gains are shared, while share gains go to one country alone, unless the saving clause intervenes.

US-UK treaty capital gains on real property

Land is the clearest case. If you are a UK resident and sell a rental condo in Florida, the US may tax the gain because the property is a US real property interest. Similarly, if you are a US resident and sell a flat in Manchester, the UK may tax it.

UK property sold by a US resident

The UK has taxed non-residents on UK residential property gains since April 2015, and on all UK land and property-rich entities since April 2019. Article 13(1) and 13(2) confirm the UK can do this under the treaty. HMRC requires a non-resident Capital Gains Tax return, generally within 60 days of completion. For 2025-26, GOV.UK sets UK Capital Gains Tax at 18% within the basic rate band and 24% above it, with a £3,000 annual exempt amount. Our guide to non-resident Capital Gains Tax covers the 60-day return in detail.

US property sold by a UK resident

For US real estate, the Foreign Investment in Real Property Tax Act (FIRPTA) applies. A buyer generally withholds 15% of the gross sale price under Internal Revenue Code section 1445, according to the IRS FIRPTA withholding page. The seller then files a US return to reconcile the actual tax. Because the US has the primary right under Article 13(1), the UK gives credit for the US tax against its own Capital Gains Tax on the same gain.

Shares that count as land

Article 13(2) treats certain shares as UK real property when they derive the greater part of their value from UK land. Shares regularly traded on a stock exchange are excluded. Consequently, selling an unlisted UK property company can be taxed in the UK even if you live in the US, which surprises many investors.

Shares, funds and other assets under Article 13(5)

Article 13(5) is the default rule. Gains on any property not covered by the earlier paragraphs are taxable only in the seller's country of residence. For most people, that means listed shares, unlisted shares in trading companies, funds, cryptocurrency and personal assets.

A non-US citizen in either country

For a British citizen resident in the UK, Article 13(5) means only the UK taxes a gain on US-listed shares. US domestic law rarely taxes non-resident aliens on stock gains anyway, so the treaty mainly confirms the position.

The saving clause for US citizens

For Americans, the picture changes. Article 1(4), the saving clause, lets the US tax its citizens as if the treaty did not exist, and Article 13 is not among the listed exceptions. Our article on saving clause exceptions lists the articles that do survive. As a result, a US citizen living in London is taxed on a share gain by the UK as the residence country and by the US as the citizenship country.

How double tax relief works for US citizens in the UK

When both countries tax the same gain, Article 24 decides which one gives up its tax. The general principle is that the country with the stronger treaty claim taxes first, and the other gives credit.

The US share problem

The third row is where errors cluster. Under US domestic rules, a US citizen's gain on US shares is US-source income, so a foreign tax credit would normally be blocked by the section 904 limitation. However, the treaty's double taxation relief provisions treat that gain as foreign-source for credit purposes, so the UK tax becomes creditable. You report it in a separate "resourced by treaty" category on Form 1116 and disclose the treaty position. Our guide to treaty re-sourcing on Form 1116 walks through the mechanics.

Rate differences still leave a top-up

Credits only remove double taxation; they do not equalise rates. For 2025, US long-term capital gains rates are 0%, 15% or 20%, according to the IRS, and the 3.8% Net Investment Income Tax can apply on top. Foreign tax credits cannot reduce that 3.8% charge. Therefore, a higher-rate UK taxpayer paying 24% usually owes no further regular US tax on the gain, but may still owe Net Investment Income Tax.

The six-year rule in Article 13(6)

Article 13(6) is the anti-avoidance paragraph. It says paragraph 5 does not stop a country from taxing, under its own law, gains of an individual who is now resident in the other country but was resident in the first country at any time in the six years before the sale.

How the UK uses it

The UK's temporary non-residence rules tax certain gains made by people who leave the UK and return within five years. Article 13(6) protects that domestic rule from treaty override. For example, if you leave London for New York, sell a large shareholding in year two, and return to the UK in year four, HMRC can tax the gain on your return. Our guide to temporary non-residence rules explains which gains are caught.

What it means for planning a move

In our experience, clients often time a share sale for the first year after emigration, assuming the treaty shields it. Article 13(6) means the treaty does not shield it if your old country's domestic law still reaches the gain. Accordingly, you need to check both the treaty and each country's domestic rules before you sell.

Where the UAE fits in a three-country move

The UAE levies no personal capital gains tax, but that does not switch off US-UK treaty capital gains rules. A US citizen in Dubai stays taxable in the US on worldwide gains, and UK land stays within UK non-resident Capital Gains Tax. Notably, a short Dubai stay between two periods of UK residence can trigger the temporary non-residence rules on return.

Frequently Asked Questions

Does the US-UK tax treaty stop the US taxing a US citizen's capital gains in the UK?

No, the US-UK tax treaty does not stop the US taxing its citizens' capital gains. Article 1(4), the saving clause, lets the US tax citizens as if the treaty did not exist, and Article 13 is not one of its exceptions. Instead, the treaty prevents double taxation through foreign tax credits under Article 24.

Which country taxes a UK resident who sells US shares?

Under Article 13(5) of the US-UK treaty, gains on US shares are taxable only in the UK if the seller is a UK resident and not a US citizen. If the seller is a US citizen, both countries tax the gain, with the UK taxing first and the US giving a foreign tax credit on Form 1116.

Can the UK tax an American who sells a UK flat after leaving the UK?

Yes, the UK can tax a non-resident on a gain from UK land and buildings. Article 13(1) and 13(2) of the US-UK treaty give the UK that right, and UK law has charged non-residents on UK residential property since April 2015 and on all UK land since April 2019. A non-resident Capital Gains Tax return is generally due within 60 days of completion.

What is the six-year rule in the US-UK tax treaty?

The six-year rule is Article 13(6) of the 2001 US-UK tax treaty. It lets a country tax, under its own domestic law, gains made by an individual who was resident there at any time in the six years before the sale, even if the person is now resident in the other country. The UK relies on it for its temporary non-residence rules.

Do UAE residents pay capital gains tax on UK property?

Yes, UAE residents can pay UK Capital Gains Tax on UK property. The UK charges non-residents on gains from UK land and property-rich entities wherever they live, and the UAE's lack of a personal capital gains tax does not change that. For 2025-26, HMRC charges 18% or 24% on these gains depending on the seller's income.

Can I use UK capital gains tax to offset the 3.8% Net Investment Income Tax?

No, UK Capital Gains Tax cannot offset the US 3.8% Net Investment Income Tax. The foreign tax credit under Internal Revenue Code section 901 reduces only regular income tax, and the Net Investment Income Tax sits in a separate chapter of the Code. US citizens in the UK with large gains may therefore owe this tax even after full foreign tax credits.

Plan the sale before you sign

US-UK treaty capital gains rules reward planning and punish assumptions. The treaty decides who taxes first, Article 24 decides who gives credit, and domestic rules in each country decide how much is due. If you are selling property, a business or a large portfolio while living across the US, UK or UAE, book a consultation with Tranzesta. We will model the gain in each country before you exchange contracts.