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News / Blog / Research & insight article

Tax planning and regulatory news July 2015

Chestertons

While the Budget was mostly positive for the housing market, non-doms and buy-to-let landlords will be less happy.

Nick Barnes

–– The current relief available on mortgage interest that landlords of residential property can claim will be restricted to the basic rate of income tax. The restriction will be phased in over a four year period, starting from April 2017.

–– The government will also reform how residential landlords can account for the costs they incur in improving and maintaining rental property. Currently, landlords of furnished properties can deduct 10% of their rent from their profit to account for wear and tear, irrespective of their expenditure. From April 2016, the government will replace this allowance with a new system which will only allow relief on costs they actually incur.

–– The Rent-a-Room relief will be increased from £4,250 to £7,500 a year from April 2016.

–– From April 2017, anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed UK-domiciled for tax purposes. Furthermore, it will no longer be possible for somebody who is born in the UK to parents who are UK domiciled to claim non-domicile status if they leave but then return and take up residency in the UK. These changes will effectively bring an end to the current permanent non-domicile status.

–– From April 2017 the government will also introduce new rules so that everybody who owns residential property in the UK and would otherwise pay inheritance tax on that property cannot avoid paying it by holding it within an offshore structure.

–– The chancellor confirmed that a new transferable nil-rate band for Inheritance Tax (IHT) will be introduced from April 2017. This will apply when a main residence is passed on death to direct descendants. The allowance will be up to £100,000 in 2017-18, up to £125,000 in 2018-19, up to £150,000 in 2019-20, and up to £175,000 in 2020-21. This is in addition to the existing inheritance tax nil-rate band, which is set at £325,000 for the estates of individuals. This will create an effective £500,000 inheritance tax threshold for estates in 2020-21. As with the current nil-rate band, any unused main residence nil-rate band will be transferred to a surviving spouse or civil partner and means the effective inheritance tax threshold will rise to £1 million in 2020-21.

–– In order to offset some of the loss of tax revenue under the IHT changes, there will be a tapered withdrawal of the main residence nil rate band for estates with a net value of more than £2 million.

–– The government announced that the Help to Buy: ISAs, as promised in the March Budget, will be available for first time buyers to start saving into from 1 December 2015.

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Nick has more than 20 years’ experience within the property research arena.

Nick Barnes

Nick Barnes

St Magnus House

020 3040 8406