Stamp duty, split-year treatment and inheritance tax – why the Sussexes' return is more complex than it looks
Buying a home in England while retaining properties overseas could leave Prince Harry and Meghan facing a significant Stamp Duty Land Tax (SDLT) bill, a specialist has warned.
With the Duke and Duchess of Sussex expected to keep homes in California and Portugal, the tax position is far more complicated than headlines suggest, and the same risks apply to any client returning from a prolonged period abroad.
Molly Monks (pictured top), insolvency specialist at Parker Walsh, told Mortgage Introducer overseas property ownership triggers immediate consequences under HMRC's SDLT additional-property rates that many returning buyers fail to anticipate.
"Residential property owned anywhere in the world can count when HMRC decides whether the higher SDLT rates apply," she said. "If a buyer retains an overseas home worth at least £40,000 and purchases another home in England, the new property will normally be treated as an additional dwelling unless it qualifies as a replacement for their main residence.
"The additional-property rates are currently five percentage points above the standard residential rates. That can create a substantial extra bill on an expensive home."
A separate non-UK resident surcharge adds a further two percentage points, but Monks highlighted this uses an entirely different residence test from the one applied for income tax purposes.
"SDLT uses its own residence test, based principally on whether the buyer has spent at least 183 days in the UK during the relevant 365-day period," she said. "A buyer who initially pays the non-resident surcharge may be able to reclaim it after spending sufficient time in the UK. Special rules also apply to married couples buying together, so the outcome cannot be established simply by looking at one person's nationality or usual address.
"We do not know how many reported California or Portuguese properties are owned, whether they are legally residential dwellings for these purposes or which property has been occupied as the couple's main residence. Those facts would need to be established before calculating the actual liability."
What split-year treatment actually requires
Much of the commentary around timing has centred on split-year treatment – the mechanism that can divide a tax year into an overseas portion and a UK portion when someone relocates mid-year. Monks said the conditions are routinely misunderstood.
"Split-year treatment is not awarded simply because someone moves to Britain halfway through a tax year," she said. "A person must first be a UK resident for that tax year under HMRC's Statutory Residence Test and then satisfy the detailed conditions of one of HMRC's specific split-year cases.
"HMRC will examine when they acquired a UK home, when UK work began, how many days they spent here before and after the move and what connections they retained, including family, accommodation and previous residence.
"Common problems include spending too many days in Britain before the claimed return date, retaining sufficient UK ties during the overseas part of the year or failing a condition relating to the previous or following tax year. Keeping detailed travel records is vital. Flight bookings, calendars, employment records and evidence of when a home became available can matter considerably more than the date somebody publicly describes as their move."
Why the four-year regime is unlikely to apply
The new four-year foreign income and gains (FIG) regime has also featured in speculation about the couple's tax position. Monks said the qualifying threshold makes it unlikely to be available based on the publicly known timeline.
"The four-year foreign income and gains regime is available only during the first four years of UK tax residence following at least 10 consecutive tax years of non-UK residence," she said. "A shorter period abroad will not restart the clock. For somebody who does not qualify, there is no replacement remittance-basis election. Once a UK resident, they will generally be taxed on their worldwide income and gains as they arise – not merely when the money is transferred to Britain."
Pre-arrival planning is, she said, where the most valuable work happens. "Someone should map every overseas bank account, property, investment, business interest, trust and source of income. They can then obtain advice about the timing of disposals, available reliefs, ownership structures and how UK rules interact with those of the other country. This is particularly important for anybody with US connections because American tax obligations can continue to apply on the basis of citizenship as well as residence."
Inheritance tax positions may diverge sharply
Since April 2025, the inheritance tax treatment of overseas assets has been based primarily on long-term UK residence – broadly, residence in at least 10 of the previous 20 tax years. Monks said the Duke and Duchess could find themselves in very different positions as a result of their differing residence histories, but she cautioned against drawing firm conclusions without a full tax-year-by-tax-year calculation.
Her warning for advisers working with clients in similar circumstances is direct. "Returning to Britain can engage several different definitions of residence at once," she said. "Income tax, SDLT and inheritance tax do not all use the same test. That is why apparently simple claims such as 'they returned in September' or 'they are still US residents' cannot determine the answer. The tax consequences depend on the precise rule being applied and the evidence behind it."
On the most common mistake she sees, Monks was unequivocal. "The biggest mistake is treating tax residence as a lifestyle description. Saying 'I live mainly abroad' or spending fewer than 183 days in Britain does not automatically make somebody non-resident. The first step should be to create a residence and asset map before fixing the moving date – only then should somebody decide when to buy property, sell investments, transfer funds or restructure their affairs. Tax planning carried out after the move or transaction has happened may simply be too late."
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