1. Summer Budget 2015 1
UNITED KINGDOM BUDGET
Summer 2015
Expatriate Copy
We have become used to UK budgets tinkering at the edge of traditional tax planning for non
residents and domiciliaries alike. This Summer 2015 Budget was no different.
Our summary of the points which are most likely to affect UK non residents with financial
interests here or plans to return to the UK follow.
Some of the proposals are still to be fleshed out and introduced from April 2016, while some
others, such as the domicile proposals, are subject to consultation.
MJH Tax Consultants
Registered office and correspondence address
2a Ann Street, Worthing, West Sussex. BN11 1NX
+ 44 (0) 1273 251258 mjh@mjhtax.co.uk

2. Summer Budget 2015 2
Tax lock
Legislation will be introduced to cap the following rates at current (2015–16) levels:
 the basic (20%), higher (40%) and additional (45%) rates of income tax for earnings
income in England, Wales, and Northern Ireland and UK wide savings income;
 the rates of Class 1 NICs payable by employees (12% and 2%) and employers (13.8%);
 the standard (20%) and reduced (5%) rates of VAT.
In addition, legislation will be introduced to ensure that the Upper Earnings Limit for Class 1
NICs does not exceed the Higher Rate Tax Threshold (i.e. the sum of the Personal Allowance
and the Basic Rate Limit for income tax purposes) and to prevent the removal of items from the
current VAT reduced and zero rates.
Personal tax
Personal allowance and basic rate limit
The Chancellor announced that the personal allowance will be increased from the current rate of
£10,600 to £11,000 for 2016–17 and to £11,200 for 2017–18. The basic rate limit will be
increased to £32,000 for 2016–17 and to £32,400 for 2017–18. Accordingly, the higher rate
threshold will increase to £43,000 in 2016–17 and £43,600 in 2017–18.
These increases are larger than those announced in the Spring Budget and therefore move the
Conservatives closer to their manifesto pledge to raise the personal allowance to £12,500 and the
higher rate threshold to £50,000 by 2020.
The Government is also proposing that once the personal allowance has reached £12,500, it will
be uprated in line with the National Minimum Wage (NMW), ensuring that anyone on the NMW
working 30 hours per week or less will not pay income tax. Prior to the personal allowance
reaching £12,500,
Inheritance tax
Main residence nil-rate band
As was widely expected, the Chancellor is to introduce (for transfers on death on or after 6 April
2017) an additional nil-rate band when a residence is passed on death to a direct descendant (a
child of the deceased and their lineal descendants).
For 2017–18, the allowance will be the lower of the net value of the interest in the property or
£100,000. That limit will increase annually to £175,000 by 2020–21. The standard nil-rate band
is to continue at £325,000 until the end of 2020–21 so by then an individual can have an effective
£500,000 nil-rate band. A claim will be able to be made for any unused additional rate band to be
transferred to the estate of a surviving spouse or civil partner in the same way as for the existing
nil-rate band.
The allowance is to be limited to one property, but the personal representatives will be able to
nominate which property should qualify if there is more than one in the estate. If the net value of
the estate exceeds £2m, then the additional nil-rate band will be tapered away by £1 for every £2
that the net value exceeds that amount.
Domicile
Abolition of non-domicile status for long-term residents
From April 2017, anybody who has been resident in the UK for more than 15 of the past 20 tax
years will be deemed to be domiciled in the UK for tax purposes.
Eligibility of non-domicile status for UK born individuals
From April 2017, individuals born in the UK to parents who are domiciled in the UK, will no
longer be able to claim non-domicile status whilst they are resident in the UK.

3. Summer Budget 2015 3
Minimum claim period for the remittance basis charge
Following a consultation and as a result of other changes to the taxation of non-UK domiciled
individuals, the Government is not going to introduce a minimum claim period for the remittance
basis charge.
IHT on UK Property for Non UK Domiciled
Finance Act 2017 will contain provisions (effective from April 2017) preventing non-domiciled
owners of UK residential property from avoiding IHT on that property.
Property tax
A number of changes were announced to the taxation of residential property letting income.
There was some pre-Budget anticipation that changes would be made to the rules granting
interest relief for landlords in the buy-to-let market. The restriction introduced in this respect,
which is being phased in over four years from April 2017, will not though apply to corporate
landlords. Neither will it affect owners of property whose total taxable income in the UK is less
than £43,000 per annum each.
Restricting finance cost relief for landlords.
The amount of income tax relief landlords can get on residential property finance costs (such as
mortgage interest) will be restricted to the basic rate of tax. This will ensure that landlords with
higher incomes no longer receive the most generous tax treatment. To give landlords time to
adjust, this change will be introduced gradually from April 2017 over four years.
Legislation will be published in the Summer Finance Bill 2015, and will affect landlords who are
individuals. The measure will apply to finance costs incurred on or after 6 April 2017. Furnished
holiday lettings are excluded from this reform.
Such landlords will be able to obtain relief as follows:
(a) in 2017–18, the deduction from property income (as is currently allowed) will be restricted to
75% of finance costs, with the remaining 25% being available as a basic rate tax reduction;
(b) in 2018–19, 50% finance costs deduction and 50% given as a basic rate tax reduction;
(c) in 2019–20, 25% finance costs deduction and 75% given as a basic rate tax reduction;
(d) from 2020–21, all financing costs incurred by a landlord will be given as a basic rate tax
reduction.
Individuals will be able to claim a basic rate tax reduction from their income tax liability on the
portion of finance costs not deducted in calculating the profit. Any excess finance costs may be
carried forward to following years if the tax reduction has been limited to 20% of the profits of
the property business in the tax year.
Reform of the wear and tear allowance
From April 2016, the wear and tear allowance will be replaced with a new relief that allows all
residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will
continue to apply for landlords of furnished holiday lets.
The current statutory wear and tear allowance in effect provides a measure of relief for expense
on the provision of relevant items that would rank as ‘capital’ expense (and which, because there
is no entitlement generally to capital allowances, would not otherwise secure relief).
This statutory allowance basis was introduced from April 2011, although the former non-
statutory basis (by way of extra-statutory concession ESC B47) – which provided the alternatives
of a 10% wear and tear allowance or the ‘renewals’ basis – applied up to April 2013. In practice

4. Summer Budget 2015 4
it seems that this will take landlords back to the former renewals basis that was available, by
concession, up to April 2013.
Increasing the level of the rent-a-room relief
The level of rent-a-room relief, which provides for tax-free income that can be received from
renting out a room or rooms in an individual’s only or main residential property, will increase
from £4,250 to £7,500 per year. It will also increase the level if an individual rents out rooms in a
guest house, bed and breakfast or similar, providing that it is their main residence. This increase
to the rent-a-room limit will apply from 6 April 2016.
Dividend Planning
Given that the rate of corporation tax has fallen significantly since the system of tax credits on
dividends was designed over 40 years ago, the Government believes that the dividend tax credit
is an arcane and complex feature of the tax system.
Therefore from April 2016, the Government will abolish the dividend tax credit and instead
introduce a new dividend tax allowance of £5,000 a year. The new rates of tax on dividend
income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate
taxpayers and 38.1% for additional rate taxpayers.
Pensions - Taxation of pensions at death
As expected, the Government is to reduce the 45% tax rate that applies on lump sums paid from
the pension of someone who dies aged 75 and over to the marginal rate of the recipient from
2016–17.
Pensions tax relief
There will be a consultation period on whether and how to undertake a wider reform of pensions
tax relief to encourage saving into pensions in the longer term. One suggestion is a fundamental
reform of the system so that contributions are paid from taxed income, any growth is exempt
from tax and any payments out are exempt, with the Government to provide a top up on
contributions.
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MJH Tax Consultants
Registered office and correspondence address
2a Ann Street, Worthing, West Sussex. BN11 1NX
+ 44 (0) 1273 251258 mjh@mjhtax.co.uk