Key Tax changes announced in the Finance Acts 2015

 In Tax

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Fotolia_95433568_XSSince April 2015 the sale of residential property in the United Kingdom owned by non-UK domiciled individuals can generate a tax charge. In the summer the government published the Summer Finance Bill 2015 which also proposes key changes to the inheritance tax regime applicable to many non-UK residents.  These changes, together with forthcoming changes to the ‘nil-rate’ band payable represent important developments for practitioners.  The Summer Finance Bill received Royal Assent on 18 November 2015.


Through the Finance Act 2015 the Government extended the Capital Gains Tax regime to non-UK residents. This means that, as of 6 April 2015, non-residents are required to pay either 18% or 28% of any capital gains accrued through the disposal of UK property (the percentage depending on the seller’s UK income for the relevant tax year).  Whilst these changes are, in theory at least, partially offset by allowing non-residents to register UK properties as their principal private residence in order to take advantage of the tax relief available for such properties, the circumstances in which ‘non-doms’ can do so are limited. In order to claim the relief the property must not only be classified as an individual’s main residence in the UK, but he or she must also spend at least 90 nights there for each year during which the exemption is claimed.

Some key points to consider:

  • The effects of the changes will at first be limited as only gains occurring after 6 April 2015 are taxable.
  • An individual has two years from the acquisition of any second property to make an election as to whether it should replace another as his or her principal private residence.
  • The 90 “day count” can be split between an individual and his or her spouse or civil partner, there is no need for them both to spend 90 days in the property.
  • An individual is deemed to have spent a day in a property when he or she is there overnight.
  • Some periods away from home are allowed, these relate mainly to relocation due to employment.
  • Where an individual has also incurred a loss selling other properties these may be offset these against any gains within the same tax year.
  • Where an individual lived in the UK and retired abroad he or she will still be able to claim the PPR in relation to the time that they were in the UK.
  • To claim PPR the property must be the individual’s main home in the UK, not necessarily in the world.

Changes to Inheritance Tax for non-UK residents

Among the changes announced in the Summer Budget are alterations to the inheritance tax payable by the estates of non-UK residents. From April 2017, all residential property in the UK owned by non-residents will be subject to inheritance tax whether such property is owned directly or held in a company or trust. The measure will apply to all UK property whether it is occupied or let and to whatever value.

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A UK resident who relocates abroad after April 2017 will remain liable to pay UK inheritance tax on his or worldwide assets for five years.

Introducing the main residence nil-rate band

Whilst these changes will undoubtedly represent unwelcome news to ‘non-doms’ the plans announced in the Summer Bill in relation to the main residence nil-rate band are likely to meet with greater support. IHT is of course charged on all of the chargeable assets above the ‘nil-rate band’ of £325,000. The Government intends to effectively raise this band by £100,000 in 2017 and then by £25,000 in each of 2018, 2019 and 2020. Thereafter it will rise in line with the CPI. There will be a tapered withdrawal for estates with a net value of more than £2,000,000, at a rate of £1 for every £2 over the threshold. However, this only applies where the deceased owned a residence which is left to his ‘lineal descendents’.


The changes in relation to ‘non-doms’ show a clear intention by the Government to ensure that non-residents, or indeed their estates, pay greater amounts in tax on UK property. Whilst these may be partially offset by the increasing nil-rate band the likely effect is that many personal representatives of individuals who die outside the UK may find that the estates which they are administering are now subject to UK inheritance tax.

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