Autumn Statement 2015

Capital Taxes

Capital gains tax (CGT) rates and annual exemption

No changes have been announced in respect of CGT rates or the annual exemption.

CGT: payment window

From April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.


Currently, CGT is not payable on a disposal of an asset until 31 January following the tax year in which a disposal is made. So a disposal made on the 6 April 2016 will not result in a tax bill until 31 January 2018.

This measure is another blow for buy to let landlords.

Inheritance tax (IHT) nil rate band

The IHT nil rate band is currently frozen at £325,000 and will remain at this figure until April 2021.

IHT residence nil rate band

An additional nil rate band has been introduced where a residence is passed on death to direct descendants such as a child or a grandchild. In addition, the property can pass to a current or surviving spouse or civil partner of a direct descendant.The band is not available for deaths before 6 April 2017. The band will initially be £100,000 in 2017/18, rising in stages to £175,000 by 2020/21.

The residence nil rate band can only be used in respect of one residential property which has, at some point, been a residence of the deceased. There is a tapered withdrawal of the residence nil rate band for estates with a net value (after deducting any liabilities but before reliefs and exemptions) of more than £2 million.

The residence nil rate band cannot be greater than the value of the property at the date of death.

Increasing the residence nil rate band for surviving spouses

A surviving spouse may be entitled to an increase in the residence nil rate band if the spouse who died earlier has not used, or was not entitled to use, their full residence nil rate band. The increase applies even if the earlier death was before 6 April 2017.

The calculations involved are potentially complex but the increase will often result in a doubling of the residence nil rate band for the surviving spouse.


Joe and Jill were married. Joe died in 2010 and his total estate was under £2 million. Jill dies in May 2017 and her house is bequeathed to her children. If her total estate is under £2 million the potential residence nil rate band is £200,000 (2 X £100,000). If the value of the property is less than £200,000, the increase in the nil rate band is limited to the value of the property.

Proposed relief for downsizing

Proposals will be introduced in Finance Bill 2016 to provide an increase in the residence nil rate band where the value of the property into which a person has downsized limits the amount of the residence nil rate band available on death. The proposals will also provide a residence nil rate band where a person has ceased to own a home, for example, by moving into a care home. It will be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the residence nil rate band, are passed on death to direct descendants.


The potential increase in the nil rate band is to be welcomed by many individuals but the increase has introduced considerable complexity to IHT. From April 2017 we have three nil rate bands to consider. The standard nil rate band has been a part of the legislation from the start of IHT in in 1986. In 2007 the ability to utilize the unused nil rate band of deceased spouse was introduced enabling many surviving spouses to have a nil rate band of up to £650,000. By 6 April 2020 some surviving spouses will be able to add £350,000 in respect of the residence nil rate band to arrive at a total nil rate band of £1 million. However this will only be achieved by careful planning and, in some cases, it may be better for the first deceased spouse to have given some assets to the next generation and use up some or all of the available nil rate bands.

Deeds of variation

Following the review announced at March Budget 2015, the government will not introduce new restrictions on how deeds of variation can be used for tax purposes but will continue to monitor their use.


A deed of variation allows a beneficiary under a will or an intestacy to re-direct part or all of the estate they have received to another person. Subject to meeting certain conditions, the parties to a deed can choose that the terms of the deed will be treated for IHT and/or CGT purposes as if they been part of the deceased’s will.

Deeds can therefore be very effective at changing tax liabilities.

Please contact us for further details if this is an area of interest to you.