On Monday, 29 October 2018, the Chancellor delivered what is the final planned Budget before Brexit is due to happen in March next year. It was notable for committing to more spending than had been anticipated, thought to be in reliance on a "Brexit dividend", ie banking on a favourable Brexit deal.

However, it did not contain significant changes to inheritance tax, particularly Business Property Relief, than was first thought. There were, however, a few points to note. This briefing highlights those points and serves as a reminder of several other issues that are current, and which will be of interest to clients in the coming months.

Income tax

The Chancellor brought forward the plans to raise the personal allowance for income tax to £12,500 (currently £11,850), and the Higher Rate threshold to £37,500 (currently £34,500). Taken together, it means that individuals may be able to earn up to £50,000 before reaching the 40% rate. Both these changes will now take effect from April 2019, rather than April 2020.

Capital gains tax (CGT)

There are two changes to principal private residence relief (the CGT relief when you sell or transfer your main residence) that the government proposes to make with effect from April 2020:

  • the final period exemption (tax free period) reduced from 18 months to 9 months from April 2020. This follows its reduction from 36 months to 18 months in 2014. The 36 month limit will remain for disabled persons or those living in a care home. 
  • Lettings Relief will be reformed so that it will only apply in circumstances where the owner of the property shared occupancy with a tenant. It currently applies to any property which is or ever has been the owner's main residence and does not require the owner to be in occupation with the tenant.

The government will consult on both proposals.

Entrepreneurs' Relief

There had been concerns that Entrepreneurs' Relief was being abused by many. Rather than withdrawing the relief, the government has made two amendments to narrow its application:

  • The minimum qualifying period is to extend from 12 months to 24 months with effect from April 2019.
  • In order to qualify, shareholders must be entitled to a minimum of 5% of the distributable profits and net assets of the company, as well as of 5% the share capital and voting rights as is currently required.

Inheritance tax

The Nil Rate Band will remain frozen at £325,000 until 2021.

The Residence Nil Rate Band will remain in force, with all its current complexity, and amendments were introduced clarifying the downsizing rules, and defining when a person is treated as 'inheriting' property subject to the reservation of benefit rules. These changes had immediate effect. The Residence Nil Rate Band amount for 2018/19 is £125,000.

Otherwise, there were no changes made or proposed to inheritance tax legislation.

Non-residents and UK property

In January 2019, the government intends to consult on the introduction of a further 1% SDLT surcharge for non-residents buying residential property in England and Northern Ireland. This continues the tax assault on non-residents owning UK property that started in 2015.

However, whereas previously the target had been residential property, the government has now issued legislation to charge non-residents on disposals of any types of land, residential or not. This was announced in the 2017 Budget and will take effect from 6 April 2019. This is a major change, and applies to non-resident individuals, trusts or companies that make disposals of UK land, whether directly or "indirectly" – defined as selling shares in an entity that derives at least 75% of its asset value from UK land. 

ATED-related CGT will be abolished with effect from April 2019.

Non-resident companies carrying on a UK property business will be brought within the scope of corporation tax, rather than income tax, from April 2020.

In terms of capital gains tax, non-residents who dispose of residential property currently are obliged to report the disposals within 30 days, whether there has been a gain, loss, or neither, and to pay the associated CGT liability. It is now planned that this will also apply to UK residents, from April 2020, although – unlike for non-residents – this will not apply where the gain on the disposal is not chargeable to CGT.


The government will clarify its "established" view regarding additions to excluded property trusts, by introducing legislation in The Finance Bill 2020. It is likely to say that if further property is added to a trust after the settlor becomes domiciled (or deemed domiciled) within the UK, that property will not qualify as excluded property.


There are two major consultations to be aware of currently:

  • The government intends to shortly publish its consultation on the taxation of trusts. This can be a complex area, and the government's aim is "to make the taxation of trusts simpler, fairer and more transparent" – a welcome sentiment.
  • Inheritance tax. A consultation into simplifying inheritance tax was launched by the Office of Tax Simplification (OTS) earlier this year, and it had been thought that it would report back in time for the Budget, but the outcome is still awaited. The OTS still expect to publish their report this autumn. It should make for interesting reading when it does come out.


It is worth noting that the Budget contained no "raid on pensions", as there were no major changes affecting pensions legislation. Neither were there any measures targeted at non-UK domiciliaries or the remittance basis of taxation, as there have been over the past few years.