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A growing movement in several US states is calling for the abolition of property taxes, arguing that homeowners should not have to “pay rent” to the government just to live in their own homes.
The proposal has gained traction among conservatives and libertarians who argue that property taxes unfairly penalize ownership, particularly for retirees and low-income individuals.
The push for reform is most visible in Pennsylvania, Texas, and New Hampshire, where lawmakers are considering alternatives, including higher sales taxes or new revenue sources to offset the loss of property tax income.
However, opponents argue that eliminating property taxes would cripple local governments, which rely heavily on this revenue to fund schools, emergency services, and infrastructure.
Proponents of abolishing property taxes argue that:
Some legislators, such as Pennsylvania Representative Frank Ryan, have suggested replacing property tax revenue with higher sales taxes or a state-wide income tax surcharge.
This shift, they argue, would be fairer and more predictable than property taxes, which fluctuate based on real estate assessments and market conditions.
In Texas, a state with no income tax, property taxes are the primary source of local government funding.
Conservative lawmakers have pushed for a gradual phase-out of property taxes, replacing them with consumption-based taxes.
Opponents of the proposal argue that eliminating property taxes would lead to:
In Pennsylvania, for example, nearly 50% of school district funding comes from property taxes. Replacing this revenue would require a massive increase in other forms of taxation.
The state’s HB 900 proposal includes a broad sales tax increase, but this has faced opposition from businesses and low-income advocates.
Similarly, in New Hampshire, which has no state income tax, property taxes are the primary revenue source. Any repeal would necessitate a fundamental restructuring of how local services are funded.
Some states, like Florida and Tennessee, have instead opted for property tax caps, limiting how much taxes can rise annually rather than eliminating them altogether.
The debate over property taxes in the US is deeply ideological, pitting homeownership rights against the need to fund essential public services.
While the idea of eliminating property taxes is politically appealing, the reality of replacing this revenue is complex and contentious.
Some states may experiment with gradual reductions or alternative funding mechanisms, but a complete abolition remains an uphill battle due to the heavy reliance of local governments on this tax stream.
If you have any queries about this article on property tax reform in the US, or tax matters in any US state, then please get in touch.
Alternatively, if you are a tax adviser in the US and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
Cities across Washington State are pushing for changes to property tax rules, citing budget pressures that make the current system untenable.
At the heart of the debate is a longstanding cap on property tax increases, currently limited to 1% annually unless voters approve a higher rate.
With rising costs and growing demands for public services, local governments are urging legislators to lift this cap, creating a potential shift in how municipalities fund essential services.
Washington’s property tax cap was introduced in 2001 as part of a broader effort to control tax burdens on homeowners.
The cap restricts annual increases in property tax revenue to 1%, regardless of inflation or population growth.
While this system has provided stability for property owners, it has significantly constrained local governments’ ability to fund infrastructure projects, public safety, and other critical services.
For example, a city facing a 3% annual rise in operating costs can only increase property tax revenue by 1%, leaving a budgetary gap that must be filled by other means or cuts to services.
As inflation rates outpace this limit, the strain on municipal budgets grows.
Proponents of lifting the cap argue that the current system no longer reflects economic realities.
Municipalities are struggling to keep up with rising costs for public safety, infrastructure maintenance, and community programs.
Additionally, the cap does not account for population growth, which increases demand for services such as policing, firefighting, and waste management.
Local governments argue that without the ability to raise property taxes more substantially, they are forced to rely on regressive funding mechanisms, such as increased sales taxes or utility fees, which disproportionately impact lower-income residents.
Not everyone supports the proposed changes.
Homeowners and property rights advocates worry that lifting the cap could lead to unchecked increases in property taxes, making housing less affordable and potentially driving residents out of high-tax areas.
The concern is particularly acute in cities with rapidly increasing property values, where even modest tax rate hikes could result in significant tax bills for homeowners.
State legislators are expected to debate the issue in the coming months.
Some proposals suggest replacing the 1% cap with a system tied to inflation or local cost-of-living adjustments.
Others advocate for a tiered approach, where cities could exceed the cap for specific projects or programs with oversight to prevent misuse.
The outcome of this debate could have far-reaching implications for how Washington cities fund essential services while balancing the financial concerns of homeowners.
The push to raise Washington’s property tax cap reflects a growing tension between the need for sustainable municipal funding and the desire to keep housing affordable.
As cities contend with rising costs and budgetary constraints, finding a solution that addresses these competing priorities will be critical for the state’s future.
If you have any queries about this article on property tax changes or tax matters in Washington, then please get in touch.
Alternatively, if you are a tax adviser in the United States and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
Singapore has long been known for its robust economy, high standard of living, and thriving real estate market.
However, with property prices soaring in recent years, the government has decided to take action.
A significant increase in property taxes for luxury residential homes is set to take effect in 2025, a move aimed at addressing wealth inequality and stabilizing the housing market.
This new policy, while applauded by some, is expected to create ripples among high-net-worth individuals and foreign investors alike.
Under the updated tax regime, property owners will face a progressive tax structure.
For owner-occupied properties valued at more than SGD 2 million, tax rates will rise substantially, with those at the top end of the market seeing the sharpest increases.
The highest tax rates will climb from 12% to 20%, targeting homeowners of Singapore’s luxury residences.
Investment properties, which include those not used as primary residences, will also face a significant tax hike.
The rates here will rise from 20% to a maximum of 27%.
The government has been clear about its intention to discourage speculative investments, especially from foreign buyers, and has simultaneously raised stamp duties for this group.
For properties valued above SGD 10 million, often owned by the ultra-wealthy, the tax hike is particularly pronounced.
This category has been explicitly targeted as part of the government’s strategy to address inequality and channel wealth back into the economy.
The rationale behind these changes is clear: the government is looking to curb soaring property prices, particularly in the luxury segment, which has been fueled by strong demand from both local and foreign investors.
This price surge has made housing less accessible for middle-income families and young Singaporeans trying to get on the property ladder.
By imposing higher taxes on high-value properties, the government aims to make the market more equitable.
Additionally, the revenue generated from these taxes will likely be redirected into public housing projects, infrastructure improvements, and social programs, further supporting those in the lower- to middle-income brackets.
For those owning luxury properties, the financial implications are significant. Consider the case of a high-end condominium valued at SGD 5 million.
Under the current tax regime, the property owner pays around SGD 60,000 annually in property taxes.
Under the new rules, this figure will rise to approximately SGD 100,000, representing a substantial increase even for affluent homeowners.
Foreign investors, who have traditionally played a significant role in Singapore’s luxury property market, are also expected to feel the pinch.
The increase in both property taxes and stamp duties may lead many to reconsider future purchases, potentially cooling demand for high-end properties.
This could have a ripple effect, slowing price growth in the luxury segment and possibly redirecting investment into other areas, such as commercial real estate.
The new property tax rules are expected to stabilize prices in the luxury property market.
By making it less attractive for speculative investors, the government hopes to create a more balanced market.
However, the impact may extend beyond luxury homes.
Some investors might pivot toward commercial properties, which remain unaffected by these tax changes, or explore opportunities in less regulated markets outside Singapore.
Meanwhile, middle-income families could benefit indirectly from these measures.
With revenue from the tax hikes potentially funding public housing projects, affordable housing supply could increase, offering more opportunities for Singaporeans to own homes.
Luxury homeowners and property investors should start planning for these tax changes now. Reassessing property portfolios is a critical first step.
Those who own multiple properties may consider selling or restructuring their investments to minimize tax liabilities.
It’s also worth exploring any available tax reliefs or exemptions to offset some of the additional costs.
Seeking professional advice is equally important.
Tax advisers with expertise in Singapore’s property market can provide tailored strategies to help individuals and businesses navigate the changes effectively.
Singapore’s decision to hike property taxes on luxury homes reflects a bold commitment to addressing wealth inequality and stabilizing the housing market.
While the changes are expected to create challenges for high-net-worth individuals and foreign investors, they also present opportunities to promote greater equity and fund public housing initiatives.
As these changes take effect, careful planning and expert advice will be essential for those impacted.
If you have any queries about this article on Singapore’s property tax hike, or tax matters in Singapore, then please get in touch.
Alternatively, if you are a tax adviser in Singapore and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
In Andrew Nunn v HMRC [2024] UKFTT 298 (TC), the First-tier Tribunal (FTT) ruled in favour of the taxpayer.
The case revolved around a property sale agreement between Mr Nunn and a developer, which took place before formal contracts were signed.
This decision could serve as a key reference for taxpayers entering into similar development agreements.
Andrew Nunn purchased a property in Oxfordshire in 1995 for £120,000.
In 2015, he agreed to sell a portion of his garden to a developer, Michael Daly, for £295,000.
The developer planned to build two houses on the land and had already secured planning permission. Although heads of terms were agreed, formal contracts were delayed.
To facilitate construction, Mr Nunn signed a letter in June 2016 that allowed the developer to begin work while the formal contracts were being finalised.
Construction work commenced following this letter, and by September 2016, a formal sale contract was signed.
However, Mr Nunn faced an unexpected challenge when HMRC disallowed his claim for PPR relief, leading to a CGT charge of £72,633.80.
Mr Nunn subsequently appealed to the FTT, arguing that the land had remained part of his **private residence** at the time of disposal, and therefore should be eligible for PPR relief.
The FTT considered several critical issues in the case:
The Tribunal concluded that the relevant date for assessing whether PPR relief applied was 2 June 2016, the date on which Mr Nunn signed the letter permitting the developer to begin construction.
The Tribunal determined that this agreement altered Mr Nunn’s relationship with the land, which was no longer held for his own occupation.
The FTT held that on 2 June 2016, the land still formed part of Mr Nunn’s garden, as it had not yet been physically separated or developed.
The letter allowing construction did not immediately sever the land from his residence, and thus it still qualified for PPR relief.
The Tribunal ruled that for CGT purposes, the land was deemed disposed of on 2 June 2016, when the letter agreement was signed.
This was important as it meant the land was still considered part of Mr Nunn’s private residence on that date.
Since the FTT ruled in favour of Mr Nunn’s claim for PPR relief, the penalty of £20,155.87 imposed by HMRC was set aside.
The case hinged on the interpretation of Section 222 of the Taxation of Chargeable Gains Act 1992 (TCGA), which provides relief from CGT for gains on the disposal of a private residence and its associated grounds.
The Tribunal also referred to Section 28A of the Taxes Management Act 1970 (TMA) in relation to the enquiry and closure notice issued by HMRC.
This ruling is a welcome development for taxpayers who may find themselves in similar circumstances.
The case highlights the importance of the timing of key events, such as when development agreements are made and when works begin on the land.
Importantly, the Tribunal’s decision confirms that land may still qualify for PPR relief even if an agreement is in place for its future sale, as long as it remains part of the taxpayer’s garden at the time of disposal.
The FTT’s decision in favour of Andrew Nunn provides clarity on the application of PPR relief in cases involving property development agreements.
The case illustrates how the status of land at the time of disposal plays a crucial role in determining whether relief is available, and offers valuable guidance for taxpayers entering into similar agreements with developers.
If you have any queries about this article on Main Residence Relief or general tax matters in the UK, then please get in touch.
Alternatively, if you are a tax adviser in the UK and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
In June 2024, the Swiss Federal Court issued its second ruling on the tax treatment of French non-trading property companies, also known as Sociétés Civiles Immobilières (SCIs).
This decision, building on a previous ruling from December 2022, challenges the longstanding tax advantages many Swiss residents have enjoyed when using SCIs to acquire and manage property in France.
The rulings bring significant implications for Swiss residents who hold or plan to hold French property through these entities.
For years, SCIs have been a favored method for Swiss residents, especially in French-speaking cantons, to invest in French real estate.
These entities offered flexibility in property management and, until recently, a relatively favorable tax treatment in Switzerland, despite variations between cantons.
However, the Federal Court’s recent rulings have raised concerns over their continued tax efficiency.
The first of the two pivotal rulings, issued in December 2022 (2C_365/2021), addressed the treatment of SCIs concerning wealth tax.
The Swiss Federal Court determined that SCIs should be treated as fiscally opaque from a Swiss tax perspective, regardless of their tax status in France.
Moreover, the court ruled that the double taxation agreement (CDI CH-FR) between Switzerland and France does not prevent Switzerland from taxing SCI shares if France does not impose taxes on them.
This decision created uncertainty and raised concerns about whether these principles would apply to other tax areas, such as income tax.
On 5 June 2024, the Federal Court issued a second decision (9C_409/2024) that extended these principles to income tax.
The court emphasized that Swiss authorities must first evaluate the SCI under Swiss tax law and then consider whether the CDI CH-FR allows Switzerland to impose taxes.
The court reaffirmed that SCIs are fiscally opaque from a Swiss standpoint and, in the absence of taxation in France, Switzerland could exercise its taxation rights both on wealth and income tax.
While the second ruling resolved some uncertainties, it introduced new challenges for Swiss residents.
One significant issue stems from the differing treatment of SCIs in Switzerland and France.
In Switzerland, SCIs are seen as opaque, meaning their income is subject to taxation.
In France, however, SCIs are treated as translucent, meaning certain incomes, such as those from personal use of real estate, are not taxed.
This disparity could lead to situations where Swiss residents face taxation in Switzerland for benefits not taxed in France.
For instance, personal use of real estate held by an SCI in France, which is not subject to income tax there, could be taxed in Switzerland as an unrecognized rental benefit.
Since France does not impose income tax on such personal use, Switzerland is not obliged to prevent double taxation under the CDI CH-FR, leaving Swiss residents potentially liable for these taxes.
Given the Federal Court’s rulings, holding French real estate through an SCI could become increasingly inefficient for Swiss residents, especially in cases where properties are used for personal purposes.
The possibility of Swiss taxation on benefits not recognized by French tax authorities complicates the tax planning strategy for individuals using SCIs.
Swiss residents who own French property through SCIs should reconsider their approach to property management and ownership.
These rulings suggest that the traditional advantages of SCIs could be significantly diminished, prompting a re-evaluation of whether SCIs remain the best structure for cross-border real estate holdings.
In the short term, property owners will need to assess how these rulings affect their tax filings and ensure compliance with both Swiss and French tax authorities.
In conclusion, the Swiss Federal Court’s decisions from December 2022 and June 2024 mark a turning point for the use of SCIs by Swiss residents.
The evolving tax landscape will require careful navigation, and individuals should seek professional advice to avoid unexpected tax liabilities.
If you have any queries on this article on SCIs for French Property, or other Swiss tax matters, then please get in touch.
The High Court of Australia (HCA) has unanimously dismissed an appeal by Godolphin Australia Pty Ltd (Godolphin), concluding that the company failed to demonstrate that the “dominant use” of its properties was for primary production, thus ineligible for the primary production land tax exemption.
In this decision Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2024] HCA 20, handed down on June 5, 2024, the HCA addressed the interpretation of “land used for primary production” and the “dominant purpose” of land under section 10AA of the Land Tax Management Act 1956 (NSW) (Land Tax Act).
The HCA upheld the NSW Court of Appeal’s (NSWCA) majority view that the term “dominant use” in section 10AA(3) applies both to the “maintenance of animals” and the purpose of sale as specified in section 10AA(3)(b), adopting what they termed the “use-for-a-purpose” construction.
To qualify for the primary production land tax exemption under section 10AA(3)(b) of the Land Tax Act, the dominant use of the land must be for maintaining animals, and the dominant purpose of this use must be selling the animals or their natural increase or bodily produce.
The HCA clarified that section 10AA(3)(b) uses a composite phrase, combining the identified use of the land with a specified purpose.
The word “dominant” applies to both the use of the land and the purpose for which it is used.
Determining the dominant purpose involves evaluating the amount of land used for various purposes, the nature, extent, and intensity of those uses, the time, labor, and resources spent, and the financial gain from each activity.
An objective observer’s perspective is crucial in this assessment.
Godolphin was assessed for land tax for the years 2014 to 2019 on two properties used for breeding thoroughbred horses and racing them.
The business operations included selling about 70% of the bred horses and retaining the most promising for racing, which aimed to enhance the horses’ value and breeding fees.
Despite the racing operation running at a loss, it occupied the majority of the land and resources, while the profitable breeding operation used a smaller portion of the land.
Godolphin argued that the properties should be exempt from land tax, claiming that the dominant use of the land was for maintaining animals for sale.
The primary judge ruled in favor of Godolphin, viewing the breeding and racing operations as integrated and serving the overall objective of increasing the value of the stud operations.
This led to the conclusion that the properties were used for primary production and thus exempt from land tax.
The NSWCA reversed this decision, with the majority finding that the words “dominant use” in section 10AA(3) required examining the purpose of maintaining the animals.
The court concluded that the dominant use of the land was for racing, not for selling the horses, making the land ineligible for the exemption.
Godolphin’s appeal to the HCA contested the NSWCA’s interpretation, arguing that the “dominant use” should only apply to the maintenance of animals, not the purpose of selling them.
They contended that the sale purpose need only be significant, not dominant.
However, the HCA dismissed these arguments, affirming that the word “dominant” qualifies the composite phrase encompassing both the use of the land and the purpose.
The court ruled that the land’s predominant use for racing activities disqualified it from the primary production exemption.
The HCA’s unanimous decision reinforces the strict interpretation of the primary production land tax exemption under section 10AA(3)(b).
The ruling emphasizes the necessity of demonstrating that the dominant use and purpose of the land align with the specified criteria for the exemption. Godolphin’s appeal was dismissed, upholding the NSWCA’s decision and confirming the land’s ineligibility for the primary production exemption.
The case underscores the importance of clearly establishing the dominant use and purpose of land in tax exemption claims.
If you have any queries on this article on the Godolphin Appeal on Land Tax Exemption, or any other Australian tax matters, than please get in touch
On 21 May 2024, in Australia, the Commercial and Industrial Property Tax Reform Act 2024 received Royal Assent, officially enacting the Commercial and Industrial Property Tax (CIPT).
The new CIPT regime will apply to eligible transactions from 1 July 2024.
From 1 July 2024, qualifying land will enter the CIPT regime upon the occurrence of an entry transaction, an entry consolidation, or an entry subdivision.
Land will qualify for the regime if it has been allocated an Australian Valuation Property Classification Code (AVPCC) in the ranges of 200 to 499 (commercial, industrial, and extractive industries) or 600 to 699 (infrastructure and utilities land).
Additionally, land used solely or primarily for eligible student accommodation will also qualify for the regime.
The CIPT will not apply to properties coded for residential, primary production, community services, or sport, heritage, and cultural purposes.
If an interest of 50% or more in a qualifying property is sold, the entire property will enter the CIPT regime, with CIPT payable after a 10-year transition period.
Once land enters the regime, stamp duty will be payable one final time, and subsequent sales of the same property will be exempt from duty, provided the land continues to be used for commercial or industrial purposes.
Following a transition period of 10 years, the CIPT will apply annually at a flat rate of 1% of the site value of the land (0.5% for build-to-rent land).
Properties sold under contracts entered into before 1 July 2024, will not enter the regime, even if the settlement occurs after that date.
Purchasers seeking to invest in commercial or industrial land on a long-term basis should seek urgent advice on whether they should enter into a contract of sale before 1 July 2024.
This is because the first purchaser of land that causes it to enter the CIPT regime will be liable for both stamp duty and the CIPT after a period of 10 years.
The above information provides a snapshot of the new CIPT regime, highlighting several issues that purchasers must urgently consider. Further detail regarding the new regime is available from official sources.
If you are considering acquiring commercial or industrial land, the timing of entry into any contract will be critical in determining whether you will have ongoing exposure to the CIPT after the 10-year transition period.
If you have any queries about this article on the Commercial and Industrial Property Tax, or Australian tax matters more generally, then please get in touch.
Italy’s Value Added Tax (VAT) regulations regarding residential property appear on the brink of a significant change.
Currently, rental income from residential properties generally enjoys a VAT exemption.
This includes scenarios such as social housing, where landlords may opt to apply VAT.
However, the Italian VAT authorities restrict the recovery of VAT on costs related to these properties, a constraint primarily aimed at entities outside the construction industry—the only sector currently allowed to reclaim input VAT on residential real estate expenses.
This longstanding policy strictly adheres to the Italian VAT law. However, it has sparked concerns about whether it is consistent with the fundamental VAT principle of neutrality, particularly given the properties’ taxable use.
This rigid approach can lead to market distortions, notably contrasting with the more flexible VAT recovery rules applied to residential properties used in the hospitality sector.
To rectify these issues, a new Legislative Decree is expected as part of an ongoing tax reform in Italy.
This decree proposes to eliminate the current restrictions on VAT recovery that are based on the cadastral classification of buildings.
The intention is to extend the principle of VAT neutrality more broadly, ensuring fair treatment across different uses of residential property.
For now, the existing regulations remain in effect: VAT on expenses for residential properties, even those opted for taxation, cannot be reclaimed.
The upcoming decree, however, promises a significant shift towards a more inclusive and neutral application of VAT rules in the residential property sector, aligning tax practices with market realities and ensuring equity among different property uses.
If you have queries about this article on the proposals for Italy to change VAT Rules on Residential Property, or tax matters in Italy more generally, then please get in touch.
In a time of increasing financial strain due to the European Central Bank’s (ECB) continuous interest rate hikes, families are feeling the pinch.
So many people will be turning to that even more esteemed bank. The Bank of Mum and Dad!
In some scenarios, this doesn’t just mean cash hand outs. It might also mean gifting properties to children (or indeed other family members).
But how can property be gifted in Spain without attracting high taxes?
Are you thinking of gifting your Spanish property but don’t want to be faced with high taxes? Let our expert advisors help you transfer your family property in the most tax-efficient way, avoiding unnecessary costs all the way. Reach out now!
Gifting property in Spain is becoming a popular way for parents, spouses, and family members to support their loved ones without incurring excessive taxes.
This practice has gained traction as several regions in Spain, including Andalucia, Madrid, and Galicia, have implemented tax laws that significantly reduce or eliminate inheritance and gift taxes.
Gifting property or money occurs in various scenarios:
The Donor and the donee should be aware of the potential tax liabilities involved:
This tax applies if the property’s value has increased since you acquired it.
The capital gain is calculated by subtracting the purchase price and related costs from the property’s value at the time of gifting.
You will be taxed on this gain at a rate of 19% (or 24% if you’re a non-resident donor from outside the EU).
This is a local tax levied by the municipality on the increase in the land value of the property since it was last acquired.
The rate and rules for calculating Plusvalía Tax can vary depending on the specific location of the property.
Spain has a national gift tax, but rates are set by individual regions (Autonomous Communities).
In some regions, there can be significant exemptions for gifts to close relatives, such as children or spouses.
For instance, some regions offer a nearly zero tax rate for gifts between parents and children.
It’s important to research the specific tax rates that apply in the region where the property is located.
Worried about capital gains or gift taxes when transferring your property? Our network of experts can help keep your liabilities low across regional tax rules. Get in touch now to protect your assets and guarantee a smooth transfer process!
Besides taxes, there are additional expenses to consider, including lawyer’s fees, notary fees, and land registry fees.
To ensure a smooth and tax-efficient transfer, it’s crucial to retain a lawyer from the beginning. The gift deed must be prepared and witnessed by a Spanish notary.
Proper planning is essential, as failing to follow the correct legal procedures can lead to a significant tax burden.
For joint property owners seeking to re-arrange their holdings, a DJPO can be an effective alternative, reducing taxes by up to 86%.
It applies in situations like divorce, re-arranging inheritances, and property re-organization among family and friends.
Gifting property can be an excellent way to help loved ones while minimizing tax obligations.
To avoid high taxes and ensure a smooth legal process we would certainly recommend tapping into local expertise
Ready to gift your property in Spain? Ensure a smooth, tax-efficient transfer with the help of an expert. Find your international tax expert here and get specialised Spain tax advice to minimise taxes and avoid costly mistakes
In a significant policy shift outlined in the Spring Budget 2024, Chancellor Jeremy Hunt has announced comprehensive reforms to the tax treatment of non-UK domiciled individuals (non-doms) residing in the UK.
These changes, aimed at restructuring the non-dom regime, will notably impact potential purchasers of UK property.
Here, we delve into the key aspects of the proposed adjustments and what they mean for buyers of UK real estate.
Non-doms are individuals whose permanent home is not in the UK, yet who spend part of the year living in the country.
Under the current system, non-doms can avoid UK tax on their foreign income and gains (FIG) by not bringing these funds into the UK, leveraging the ‘remittance basis’ of taxation.
The UK Government plans to eliminate the non-dom regime, transitioning to a new residence-based tax system effective from 6 April 2025.
Under this new regime, individuals moving to the UK after spending at least a decade abroad will enjoy a four-year period during which they are exempt from UK tax on their worldwide FIG, regardless of whether the income is brought into the UK.
The transition period in 2025/26 and 2026/27 will also introduce specific reliefs.
It’s important to note that while the UK Inheritance Tax (IHT) exposure for non-UK assets may change under the new rules, the IHT treatment for UK residential property remains unchanged.
This means all property owners, regardless of their domicile status or eligibility for the four-year exemption, will still face IHT on UK properties.
For non-residents purchasing UK property, the upcoming changes will have no direct impact, provided they manage their days spent in the UK carefully to avoid becoming tax residents.
Conversely, those relocating to the UK might find the new regime more favorable, as they can bring FIG into the UK without tax implications for the first four years of residence—a simplification of the current system.
However, buyers planning a long-term move should consider the broader implications on their worldwide assets, as residing in the UK beyond four years subjects their global FIG to UK tax, and a ten-year stay brings their entire worldwide estate under the UK IHT regime.
Investors purchasing properties for their children or for investment purposes need to consult with advisors to navigate the best funding strategies and understand their IHT exposure.
A Singaporean buying a property in Mayfair for rental and capital appreciation purposes will remain unaffected by the tax regime changes, given their non-resident status.
However, the tax rate on gains from UK residential property sales will adjust from 28% to 24% starting 6 April 2024.
A couple from the Middle East buying a London property for short stays will need to carefully manage their time spent in the UK to avoid residency and its tax implications.
Consulting with tax advisors is crucial to understanding the residency thresholds.
An American buying a flat in London for his daughter presents a unique case due to the US’s global taxation on citizens.
The entrepreneur might face lesser impact from the UK’s tax changes and should explore ways to optimize his tax position, considering the US and UK tax obligations.
These changes mark a pivotal moment for non-dom individuals engaged in the UK real estate market.
It’s imperative for potential buyers and existing non-dom property owners to seek comprehensive advice to navigate the evolving tax landscape effectively.
Final thoughts
If you have any queries on this article on the Spring Budget 2024: Implications for Non-Dom Real Estate Buyers, or UK tax matters more generally, then please get in touch.