The Brexit vote affects individual taxpayers every bit as much as it impacts businesses. If corporation tax rates are reduced to 15%, the Treasury will have to make up the tax shortfall from elsewhere. What are the issues you should consider?

Residence

Since 2013 the UK has operated a Statutory Residence Test (SRT) to determine which individuals are UK resident and therefore liable to pay UK income tax and Capital Gains Tax (CGT) on their worldwide income and gains. SRT is complex but it allows taxpayers who submit UK self-assessment tax returns to achieve some certainty on their residence status.

Residence is determined on a year by year basis and it’s vital that you continue to meet the conditions for non-residence each and every year. Day counting remains important but is not the only factor; every aspect of your lifestyle can contribute to the number of UK ties so careful record-keeping of time spent in the UK is essential.

Citizens of other EU countries who are working or living in the UK should now look to clarify their tax residence status and ensure they are compliant with HMRC requirements. UK citizens living in other countries will also have to review their likely tax residence position going forward.

Domicile

Your domicile status is important for tax purposes and determines your exposure to UK Inheritance Tax (IHT). Domicile is a much longer term concept than residence and individuals can remain UK domiciled for many years after ceasing to live here.

If you are UK domiciled, your worldwide assets are liable to IHT on your death while individuals who are not UK domiciled are liable to IHT on the value of their UK assets. Special deemed domicile rules may apply. The UK has very few IHT double tax treaties so UK IHT cannot necessarily be offset against equivalent gift or estate tax liabilities charged by other countries.

Various IHT reliefs are available for business assets but homes and investments in the UK can suffer 40% IHT on values over the nil rate band threshold of £325,000. Advance planning can mitigate the impact of IHT on your estate, but every case is different and solutions will vary from person to person.

Scottish Taxes

UK residents living in Scotland are liable to the Scottish Rate of Income Tax (SRIT) on their employment income, self-employment income and property income. SRIT is not charged on capital gains, dividends or other investment income.

SRIT has been in force since April 2016 and is currently set at the same rate as UK income tax. However we may see a divergence of rates soon, from as early as April 2017.

Scottish residence for SRIT purposes is determined differently from UK residence; where an individual has homes both in Scotland and elsewhere in the UK, there can be scope for planning around Scottish residence, with each case being fact dependent.

If Scotland gains more fiscal autonomy in the future there will be further taxation changes. If you want to discuss the potential impact on your personal tax position you should get in touch either with your usual Johnston Carmichael contact or please contact me directly for further advice.