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United Kingdom: Post-General Election Budget | Tax Connect Flash


UK Post-General Election Budget

A UK Budget was delivered on 8 July 2015 following the recent General Election. Some of the measures that may be of interest to CMS clients are briefly set out below.


Corporation tax rate

The rate of corporation tax will reduce, from the current 20%, to 19% in 2017 and 18% in 2020.

The change may have an effect on preferred property holding structures for non-residents in the future. The rate at which income tax is withheld from certain UK sourced income of non-resident investors remains at 20%.

Therefore, this reduction in the rate of corporation tax may make suffering corporation tax at 19% or 18% marginally more attractive for non-resident landlords, for example, than income tax (at 20%).

Large businesses

The payment dates for instalments of corporation tax are being brought forward by about a month for the largest companies in the UK (those with profits in excess of £20 million).

The Government is proposing a new levy on large employers to fund new apprenticeships. This measure is expected to encourage in-work training by employers and stop employer under-investment in workplace training.


A new tax at 8%, on top of corporation tax, is introduced from 1 January 2016 on bank profits. At the same time the existing UK ‘bank levy’ will be gradually reduced from the current rate of 0.21% to 0.10% by January 2021.

There will also be a change in the scope of the existing bank levy from 1 January 2021, meaning that UK headquartered banks are levied on their UK balance sheet liabilities only.

Relief will be allowed against the UK bank levy for any payments made to the Eurozone Resolution Fund from 1 January 2016.


Income tax on dividends

The tax treatment of dividends is being changed. There will no longer be a 10% tax credit and the income tax rates for dividends are being revised. From April 2016 UK source dividends of no more than £5,000 per annum per individual will be free from UK income tax. Any dividends earned in excess of this will be chargeable to income tax at progressive rates of 7.5%, 32.5% and 38.1%.

Investment property

The Chancellor announced that interest relief allowed to ‘buy-to-let’ (individual) landlords, would be restricted to the basic rate of income tax (currently 20%). This relief is currently available at the marginal tax rate of the taxpayer (which can be 40% or 45%).

The restriction will be brought in progressively from 2017/18, when 25% of financing costs will be subject to the new rules, with 50%, 75% and 100% of financing costs being brought within the new rules in, respectively, 2018/19, 2019/20 and 2020/21.

This measure is aimed at individual landlords letting out UK residential property whether they have one ‘buy-to-let’ or are ‘professional landlords’, but does not apply to lettings through corporates.

Non-domiciled status

Anyone who has been resident in the UK for more than 15 years out of the previous 20 will by April 2017 lose non-domiciled status. This will mean that if they remain UK resident they will be liable to UK tax on their worldwide income and gains and not just in respect of UK income and assets. They will also be subject to UK inheritance tax on their estate on death. This may impact, for example, the UK residential property market as taxpayers change their arrangements.

In addition, non-domiciled persons will also pay UK inheritance tax on UK residential property assets even on property held through an offshore structure eg a non-UK company.

Already announced changes, including increasing the charge that has to be paid by longer-term residents to benefit from non-domicile status for income tax and capital gains tax purposes, were confirmed.

Other inheritance tax

There is a gradual increase in the tax exempt ‘nil rate band’ effectively exempting from tax the family home of a couple worth up to £1million, though for homes worth more than this, the exemption is reduced so that homes worth more than £2.35 million will not benefit from this change. This change will be introduced gradually up until 2020.


Portrait of Anna Burchner
Anna Burchner
Nicholas Stretch
Jim Hillan