With Chancellor George Osborne forced to back down on cuts to tax credits, following a defeat in the House of Lords, the Society for Trusts and Estate Practitioners suggested that business property relief and agricultural property relief might be targeted in a bid to raise revenue. In the end though, this did not happen, bringing welcome news to many.
Deeds of variation were also the subject of a consultation earlier in the year. However, while their use will continue to be monitored by the government, there will be no restrictions at present. This is good news as deeds of variation provide welcome flexibility, allowing families to re-direct the assets in an estate within two years of death. They are not always used to save inheritance tax, although this is what they are best known for.
One of the big changes affecting private clients is the rise in the rate of stamp duty on buy-to-let properties and second homes. There will be an additional 3% charge above the existing stamp duty rate for properties worth in excess of £40,000. This means stamp duty of 8% on homes valued at £250,001 to £925,000, rising to 15% for houses over £1.5m.
This, coupled with the removal of landlords’ ability to deduct the cost of their mortgage interest from their rental income when they calculate a taxable profit (which will be phased in from 2017), makes buy-to-let investments look much less appealing.
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